February 21, 2012

New York Stock Exchange Further Limits Broker Non-Vote Items

On January 25, 2012, the New York Stock Exchange (the “NYSE”) announced revisions to NYSE Rule 452 that would end its prior policy of allowing brokers to vote on certain corporate governance proposals supported by management. Under the new rule, which is effective immediately, brokers will not be able to vote on certain corporate governance proposals without their clients’ prior instructions.

Changes to the Rule 452

Rule 452 governs discretionary voting by brokers when the broker’s clients have not provided instructions on how to vote shares held thereby. Pursuant to Rule 452, brokers were previously permitted to vote uninstructed shares on “routine” proposals. As a result of the change to Rule 452, broker non-votes may have a significant effect on the outcome of corporate governance proposals.

Under revised Rule 452, brokers are no longer permitted to vote uninstructed shares with respect to certain corporate governance proposals that are now considered “non-routine.” The types of corporate governance proposals described and affected by the new rule include proposals pertaining to:

• de-staggering the board of directors;
• providing for majority voting in directors elections;
• eliminating supermajority voting requirements;
• providing for the use of written consents by stockholders;
• providing rights to call a special meeting; and
• eliminating certain types of anti-takeover provision overrides

Going forward, when these types of proposals are included in proxy statements, they will be treated by the NYSE as “Broker May Not Vote” matters. Further, although the rule does not specifically address other items, additional types of corporate governance proposals such as requiring an independent Chairman, eliminating cumulative or dual-class voting rights, redemption of poison pills, and reincorporating the company could be also be impacted by the narrowing of Rule 452.

Impact on Issuers

The changes in Rule 452 and the resulting increase in the number of broker non-votes will likely provide stockholders a greater probability of passing their own corporate governance initiatives. Issuers on the NYSE with corporate governance proposals on the ballot this year would be advised to determine whether the new broker voting prohibitions will apply to their particular proposals. If brokers are prohibited from voting without instructions, it will be important for issuers to connect with their stockholders in advance of any shareholder meeting to garner as much support as possible for their position on specific proposals covered by the new Rule 452.

For more information, please see the NYSE notice regarding the changes in Rule 452 by visiting the following website:

http://www.nyse.com/nysenotices/nyse/informationmemos/detail;jsessionid=0610BF54CEE27EE065651385975C6C1B?memo_id=12-4

If you have any questions regarding the matters described herein or should you wish to discuss these matters further, please do not hesitate to contact Joseph Lucosky (732-395-4400; jlucosky@lucbro.com), Seth Brookman (732-395-4400; sbrookman@lucbro.com), or the attorney with whom you regularly work

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