Yesterday, the SEC repealed a long‐​standing rule which allowed brokers to vote shares on behalf of their investors, unless they obtained written directions from each individual investors. While investors have long been able to direct the voting of their shares, many do not take the time to. In these cases, the brokers vote those shares, after all they are the agents of the investors and are hired to act on their behalf.


The direct effect of the rule will be to reduce the voting weight of retail investors, as represented by their brokers. In voting against the rule, SEC Commissioner Kathy Casey raised the point that the rule would skew voting toward large institutional investors and away from little retail investors.


What did the large institutions investors have to say? As reported in today’s Financial Times, Ann Yerger, who represents large pension funds claimed that “counting uninstructed broker votes is akin to stuffing the ballot box for management.” One has to wonder whether the pension funds, which Ms. Yerger represents should have to get written instructions from all the pensioners whose pensions are managed by these funds? Of course not, treating all agents of investors equally would make too much sense for the SEC.


Then one should not be too surprised to see pension funds be allowed to cast their “uninstructed” votes while brokers cannot. The largest pension funds manage the retirement of unionized state and local employees, often with the fund management itself representing the interests of the unions. We witnessed this same favoring of union interests over the common good in the auto bailouts.


The rule once again illustrates that the new bosses in Washington are busy rewarding their allies at the expense of everyone else.