By Doug Chia, Senior Counsel & Assistant Corporate Secretary, Johnson & Johnson
This is my first post on JNJ BTW.
Today, I’m writing on a subject near and dear to my heart—shareholder voting. You may have heard that earlier this month the U.S. Securities & Exchange Commission (SEC) announced a number of corporate governance reforms aimed at shoring up investor confidence. You can read about all of those reforms in the SEC’s press release, but I’d like to highlight in this post what is perhaps the most significant of these reforms—one that may directly impact you if you own Johnson & Johnson stock through a brokerage account--the elimination of the “broker vote” in uncontested director elections.
For those of you who don’t live and breathe this subject, I’ll attempt to translate that into plain English. Previously, under the rules of the New York Stock Exchange, if stock brokers didn’t receive instructions from clients on how to vote their shares on the election of the board of directors at an upcoming annual meeting, the broker had the discretion to vote those uninstructed shares as they deemed appropriate. Since typically retail brokerage account holders who did vote tended to vote in favor of the recommendations made by the listed company’s management team, most brokers voted uninstructed shares along management’s recommendations.
To illustrate how this discretionary broker voting worked, let’s say you owned 100 shares of Johnson & Johnson stock in a brokerage account at XYZ-Trade. You received your Johnson & Johnson Annual Report, Proxy Statement and proxy card for the April 23, 2009 Annual Meeting in the mail from XYZ-Trade sometime in mid-March. As you typically do every year, you perused the Chairman’s letter and some of the stories about Johnson & Johnson’s newest business developments in the Annual Report, but you didn’t mail your proxy card back to XYZ-Trade in time to vote on the Johnson & Johnson Board of Directors or other business. In the final days before the Annual Meeting, XYZ-Trade saw that you had not instructed them on how to vote your 100 shares of Johnson & Johnson stock and thus cast the votes for the election of directors on your behalf.
Because of the SEC’s recent action, your broker will not be able to do this for next year’s Johnson & Johnson Annual Meeting. From now on, if you don’t take the affirmative step of telling your broker how to vote your shares in director elections, your votes will not be counted at all. Why am I taking the time to explain this to you? Basically, I am encouraging you to vote. Vote your shares at next year’s Annual Meeting and at every shareholder meeting after that one for as long as you own Johnson & Johnson stock. Vote in line with Johnson & Johnson management’s recommendations or vote against them if that’s what you wish. Just please take the time to vote, not only for our shareholder meetings, but for all of the companies in which you hold stock. We think it’s important that you do so. After all, voting in director elections is your legal right as a shareholder and starting now, if you don’t, no one will do it for you. At Johnson & Johnson, we believe in shareholder engagement and hope you exercise your right to vote going forward.