Apathetic shareholders can be as much of a problem for companies as hostile ones

June 20, 2013
June 20, 2013

Advanced Micro Devices (AMD) is in a frustrating pickle. The US chipmaker wants to issue up to 16.5 million new shares so it can pay its executives in stock options and restricted shares. Shareholders have voted more than 85% in favor of the plan. And yet AMD can’t go ahead. Or rather, it can—with a hefty price tag. That’s because the total votes cast on the proposal account for fewer than half of its outstanding shares, and under New York Stock Exchange rules, unless it can bump up the vote, the new stock wouldn’t count as performance-related pay, and won’t qualify for the attendant tax breaks.

As a result, AMD has postponed tallying votes on the proxy measure three times already, for a total of almost two months. It’s not the only company kicking votes down the road. Last week we told you how silver producer Hecla Mining was able to turn defeat into victory in a shareholder referendum on pay by waiting an extra month for more votes to come in. Other companies that have postponed vote counts in the past year or so include American Capital Agency, a real-estate investment trust with a market-capitalization of $10.1 billion, which has twice put off a final count in its bid to double the number of preferred shares it can issue; and Apollo Investment, a business development company worth about $1.8 billion, which last August put off a final vote on another measure for about a month before ultimately reporting victory by a 3-to–1 margin.

Adjourning meetings isn’t common, but it also isn’t new. Broc Romanek, a former corporate and federal regulatory lawyer who now edits the TheCorporateCounsel.net blog, calls annual-meeting adjournments, postponements and recesses one of “corporate law’s great black holes.” But when companies adjourn a vote to try to get a quorum, as AMD has, it usually means they did a poor job of getting shareholders to vote on the matter at all. That makes it more of a turnout problem than a sign of shareholder discontent.

Still, from a practical perspective, the result is the same as a vote against. Without enough shareholders voting, AMD won’t be able to issue the stock it says it needs to attract and retain the best employees, or will have to pay a premium to do so—even though shareholders like the idea. It has now given itself until July 14 to persuade more investors to cast their ballots.

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