Financial Reporting Council

FRC Welcomes Shareholder Voting Proposals

FRC PN 104

14 March 2005

The Financial Reporting Council today encouraged listed companies to offer shareholders the facility to withhold their votes, rather than simply voting for or against motions at the Annual General Meeting.

In January 2004, Paul Myners recommended in a report to the Shareholder Voting Working Group that the FRC consider amending the Combined Code on Corporate Governance to require companies to offer a ‘vote withheld’ box on proxy forms for votes at the AGM. Mr Myners today issued a progress report showing that 85% of the FTSE 100 and 50% of the FTSE 250 company meetings provided such a facility in 2004.

Welcoming the progress report Sir Bryan Nicholson, Chairman of the Financial Reporting Council, said:

“The FRC will be carrying out the first formal review of progress in implementing the new Combined Code later this year, following which we will consider whether to recommend any changes to the Code. If we do so there will be full consultation on any proposals.

In the mean time it is good to see many companies voluntarily offering a ‘vote withheld’ option on proxy forms, and I would encourage others to do so. It is a useful facility that gives shareholders the opportunity to register that they have concerns without going so far as to vote against the motion. But as with votes against, it should not be seen as a substitute for constructive dialogue between shareholders and the board”.

Notes to Editors

The Financial Reporting Council (FRC) is a unified, independent regulator. Its aim is to promote confidence in corporate reporting and governance. The FRC’s five operating bodies are: the Accounting Standards Board, the Auditing Practices Board, the Financial Reporting Review Panel, the Accountancy Discipline and Investigation Board and the Professional Oversight Board for Accountancy.
The FRC is responsible for monitoring and maintaining the Combined Code on Corporate Governance, which applies to listed companies. Section D.2 of the Code deals with the AGM. Provision D.2.1 requires companies to indicate the balance of votes for and against resolutions, and the number of abstentions. In his January 2004 report, Paul Myners wrote:

"Votes consciously withheld can be a useful tool in communicating shareholders’ reservations about a resolution, provided there is a clear explanation to the company as to why the vote has been withheld. In this respect, companies should provide a vote withheld box on proxy forms, whilst retaining the current legal position where only “for” or “against” votes are taken into account when deciding whether or not a resolution is carried. When declaring the results, companies should publish the total number of votes received, the votes “for” and “against” the resolution, and the number of votes consciously withheld."
Further information on Paul Myners’ progress report can be obtained from the Investment Management Association. The IMA press notice is at:
http://www.investmentuk.org/press/2005/20050314.asp. Press enquiries should be directed to Helen Stephenson (IMA) on 020 7831 0898.
For further information on the FRC contact Chris Hodge, Corporate Governance Unit on 020 7492 2381 or e-mail: c.hodge@frc.org.uk.