June 2010

More Shareholder Say on Auditors

From CFO.com.

An unrelated regulation has prompted more companies to give their investors a vote on accounting firms.

Shareholders have weighed in on companies' choices for outside accounting firms in higher numbers this year. The uptick comes after a Securities and Exchange Commission rule went into effect that had nothing to do with how companies pick which audit firms will review their financials every year.

Rather, the rule — which became effective for all 2010 shareholder meetings — prohibits brokers from voting in director elections without their customers' direction. After the SEC approved the rule last summer, lawyers and proxy advisory firms predicted that companies would see a lower retail-vote turnout, prompting them to add routine matters to their ballots to reach a quorum. (Brokers can still cast discretionary votes on routine items, such as the ratification of accounting firms.)

"It's a technicality," explains Frederick Lipman, a partner at Blank Rome LLP and president of the Association of Audit Committees. "Everyone will have shareholders voting on auditors for this reason [to reach a quorum] alone." Indeed, during this year's proxy season, 66% of companies held such a vote, compared with 52.9% in 2009, according to data compiled by corporate-governance advisory firm RiskMetrics Group and shared with CFO.

Full article.