Citizens Council at Sun City Texas

Proxy Voting May 31, 2008 Volume ll

Introduction Last week our newsletter addressed Quorum Requirements. The topic this week is Proxy Voting. There are a number of voting methods designed to allow people to exercise their franchise when unable to attend a meeting. Two common alternatives to proxies are absentee ballots and or early voting which are in common use. All of the voting methods are distinctly different ways to allow people to vote when unable to attend a meeting on a specific date. We hope you find this article interesting and informative. Foreword on Quorums and Proxy Voting Written by Steve Fought The purpose of these papers is to help us all make informed choices as we move ahead in the Sun City Governance transition process. In each case we hope to provide a short background addressing why an issue might be important, what the logic might be that underpins the various views, and how other organizations such as ours have approached similar matters. For instance, in the first piece (on Quorums), we describe why and how Quorums are used and the manner in which organizations such as ours have set them. We attempt to be accurate, concise, and readable without sacrificing thoroughness. Comments are encouraged and welcome. Proxy Voting PROXY VOTING is one of several possible methods of voting designed to allow members to participate in the voting process without having to be physically present at the polls at a particular time/date. In order to participate in the Proxy process a voter assigns another individual (or organization) the authority to cast a vote in their behalf. Proxy voting is a common practice. Alternatives to Proxy Voting include Absentee Voting and/or "early voting."

Proxy Voting raises many of the same issues as does a Power of Attorney, especially in terms of scope and durability. For instance: Does the voter give over Proxy Voting rights in a manner that allows the Proxy Holder to vote in just one election in just one manner (e.g., in the election of the President of the Corporation and only for Mr. Jones)? Or are the Proxy rights durable for all elections and the proxy holder has complete discretion to vote as they deem appropriate? Proxy Voting also raises issues with respect to the relationship between the voter who transfers the Proxy and the Proxy Holder. It is not uncommon for organizations to prohibit transfer of a Proxy to a relative, employer, or in any other manner where an imbalance of power and/or conflict of interest might exist. Having transferred the right to cast a vote once, the natural follow-on questions are: 1) How many Proxies may an individual hold? (2) May the Proxy be further transferred? Some organizations limit the number of Proxies that can be held as well as their transitivity; other organizations allow Proxies to be accumulated without restriction and the pooled aggressively. The latter practice is sometimes touted as a means through which smaller shareholders, who might otherwise be held at bay, can have a significant influence over the corporate governance process -- thus advancing minority rights/influence in a majority-rule environment. On the down side, Proxy Voting has been criticized because it essentially removes the Voter from the deliberative process. It is not unusual to have persuasive arguments and/or new facts presented at the late stages of the debate or even at the meeting where a vote takes place - arguments or facts that could well sway the voter who has rendered an earlier proxy with instructions to vote in a manner counter to the new arguments/facts. With no way to alter the Proxy Vote, the deliberative process is, at best, circumvented and, at worst, negated. In addition to the broader philosophical issues, Proxy Voting raises obvious issues with respect to implementation. For instance, it is logical and prudent for organizations to require some form of proof with respect to the nature and durability of the Proxy and that it was voluntarily transferred. By the same token, once a voter has transferred a Proxy, the voter may want the Proxy eliminated if the voter then shows up and intends to vote at the meeting for which the Proxy was intended. If particular terms of the Proxy were specified at the time of transfer, there needs to be some mechanism for enforcing those terms. By the same token, organizations need to have some mechanism to assure that a single voter only transfers the Proxy vote a single time; it is entirely possible that a single voter, either accidently or intentionally, would transfer a Proxy to several individuals, thus multiplying the effect of that vote and abusing the intent of Proxy Voting. Given the many possibilities for error or abuse, it is not unusual, nor is it inexpensive, to see an organization hire an independent consultant to manage the Proxy Voting process. Indeed, in publicly held corporations oversight is an elaborate, intricate, process, regulated by the Securities and Exchange Commission. In summary, Proxy Voting is a common, and well understood, method of incorporating voters who cannot attend meetings where voting take place. It has obvious advantages and disadvantages in terms of the voting process, and can possibly introduce (significant) monetary cost into the process if an independent consultant is required. Alternative balloting methods include absentee voting and or early voting.