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On many proxy vote forms, as a shareholder, you can vote "for" or "withhold" on some board of director members and appointment of an auditor. You can vote "for" or "against" for some other proposals.

If they use plurality voting for the board members, and the number of candidates equals the size of the board, doesn't that guarantee that the outcome is always that the candidates are all elected, regardless of the votes?

Canadian corporate laws generally provide that directors are elected, either on an individual basis or by slate, through "plurality voting." Under plurality voting, shareholders vote "for" or "withhold" their votes in respect of each nominee director or slate of directors. Shareholders are not provided the opportunity to vote "against" nominee directors or slates of directors, and the "withheld" votes are not counted in the tally of votes, meaning that a nominee director or slate can be elected if only one vote is cast "for" such nominee director or slate, even where the majority of shareholders are opposed to the election of such nominee director or slate. Canada is a global outlier in this respect.

https://www.bennettjones.com/Blogs-Section/TSX-Clarifies-Mandatory-Majority-Voting-for-Director-Elections

Here are some examples of such proxy vote forms:

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    Beyond whether a particular vote is meaningful, note that for retail investors, any vote is typically useless unless the issue is extremely divisive. Not like 'voting in a large democracy has only a small chance to actually be the vote that swings an election', more like 'casting 10 votes for 10 shares when 30 institutions own 100,000,000 votes out of 150,000,000'. It might matter perhaps if there is a voter with a large minority of shares [say 10%] publicly advertising an attempt to wrest control from the current Board by enticing many retail investors to join their votes together. Mar 1, 2022 at 14:17
  • @Grade'Eh'Bacon Yes, as a minority, most retail investors are unlikely to have an impact on the outcome, but my question is about how there's any point of a vote when the outcome is pre-determined. If you just need 1 vote to win, since the only options are "yes" ("for") or "don't count vote" ("withhold"), then your own vote for yourself is enough. There doesn't really need to be a vote, since the candidates all win.
    – Victor
    Mar 2, 2022 at 0:07
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    To @Grade'Eh'Bacon's point: As a retail investor in the US, I have received calls from solicitation companies in two cases over twenty-fives year that asked for my support of the directors on the current board, rather than the alternative slate of directors some corporate raider tried to get installed instead. So these cases are rare but do happen. I have also seen a few instances were directors were not "invited back" after they received 20+% of votes against them multiple times in a row, but the bulk of such actions is driven by dissatisfied institutional investors, of course.
    – njuffa
    Mar 2, 2022 at 1:18

1 Answer 1

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Generally, shareholder vote requires 50%+1 to pass a decision (generally, because it depends on the corporate bylaws and in some companies different share classes have different voting power). So if enough people "withhold", the resolution will not pass and in this case - the director will not be appointed.

This is not an election in a sense you're thinking of for political offices, this is more of "appointment" than election. You usually do not have multiple candidates running for a position, but rather the board, or large shareholders, propose their candidates, or resolutions, and the whole body of shareholders ratifies or not that proposal.

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  • You might clarify (if "the number of candidates equals the size of the board" as OP says) how the board functions if some candidates are defeated. Can business carry on as usual with fewer board members until new ones are appointed?
    – nanoman
    Mar 1, 2022 at 7:36
  • @nanoman this depends on the corporate bylaws and the laws under which the company is organized. DE corporations require at least one board member. That said, I don't know what happens if none of the directors is elected or the board resigns.
    – littleadv
    Mar 1, 2022 at 8:35
  • I updated the question. At least before the TSX started to require listed issuers to require directors to resign if not elected by a majority of the votes cast or in a contested election, it seems like just 1 vote is enough to be appointed. The outcome is always 100% "for" because the director votes for himself, and unlike "against" votes, "withhold" votes don't count towards the percentage. I guess the voting isn't totally pointless if the directors are now compelled to resign if there are enough "withhold" votes.
    – Victor
    Mar 2, 2022 at 0:13
  • @Victor Canada is weird. You can potentially have directors who hold no shares and can't vote for themselves though
    – littleadv
    Mar 2, 2022 at 4:16

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