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Mitchell A. Dix, Owner Mitchell A. Dix & Associates. How does a shareholder make certain that a proxy is voted as he or she intends?
BACKSTORY The years of mistrust that had developed between the holder of unsold shares and the resident shareholders of a cooperative I represent finally came to a boil at their recent annual meeting. The holder, who owned a large percentage of the corporation’s shares, previously voted for the same resident board members for the past five years. A group of resident shareholders, fueled by their anger over a series of maintenance increases and assessments, wanted a change in the incumbent board but, because of historically low resident turnout at their annual meetings, could accomplish that only if they were able to collect a large number of proxies beforehand. Suspicious of the form of proxy used by the corporation in the past, they chose to create their own form of proxy without the benefit of legal counsel, and to help ensure that they would receive as many proxies as possible, they began soliciting proxy signatures almost two years before the annual meeting at which the votes were to be cast.
Unfortunately, the form of proxy they created was worded ambiguously and failed in numerous instances to clearly state the current intention of the shareholder(s) giving the proxy. Complicating matters further was that many of the proxies had been re-dated or otherwise altered over time in pen without shareholder initials. The end result was that many of the proxies were declared invalid and could not be voted, a determination that not only affected the outcome of the election but further fueled resident suspicions regarding the relationship between the holder and the incumbent board. Predictably, the meeting ended unhappily, with the proxy-holders refusing to recognize the new form and both sides threatening litigation. Ultimately, cooler heads prevailed. In an effort to address the concerns expressed by the majority of resident shareholders represented at the annual meeting and to ensure that the legitimacy of the elected would be recognized over the coming year, I successfully persuaded both the holder and the incumbent to agree to a special meeting at which only resident shareholder votes would be counted toward the election of the resident directors and a new, standardized form of proxy would be used, thereby restoring confidence in the election process. After all parties had ample time to campaign and collect new proxies, a new election was held. As it turned out, the resident shareholders voted resoundingly to reelect the incumbent board, presumably in no small part as a result of the board’s willingness to fairly address the concerns of its shareholders.
COMMENT The importance of a proxy should never be underestimated. All too often, boards will go into an annual or special meeting without soliciting an adequate number of proxies to ensure a quorum or prepare for an unexpected proxy battle that, if won, could have helped to ensure such things as the re-election of valued members, the outcome of important corporation policies, or the continued control by resident shareholders over the future of their home.
In turn, shareholders underestimate the impact that “strength in numbers” can have when it comes to influencing their future as cooperators. Regardless of what the particular issues might be, or whether you choose to use the cooperative’s form of proxy for a meeting or your own, one thing remains certain: it must be done correctly! A proxy should be worded so that the intention of the shareholder of record giving the proxy can be clearly understood or inferred. When giving your right to vote to a third party, make certain that you have fully and properly completed your proxy so that you can clearly be identified as the shareholder of record entitled to vote, and that you have named your proxy-holder, dated the proxy, and provided any other pertinent information required by the cooperative for the meeting. If you make any pen changes to your proxy, be sure you initial them. Most importantly, if you don’t wish to give general authority to your proxy-holder to vote however he or she chooses, specify how you would like your shares voted on the proxy itself. In that way you can direct how your vote will be cast, even though you are unable to be present at the meeting personally.
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My favorite vacation spot is Tuscany in Italy. To celebrate my wife’s 50th birthday, we traveled to a small medieval village there and enrolled in a cooking class. It was a unique experience.