The "Proxy Holder Discretionary Voting" Debate

Update - May, 10 2018: The changes to the proxy form have addressed some of the concerns in this post. Read about the new changes here.

Earlier in the year we blogged about the good, the bad and the ugly aspects of the new prescribed proxy forms. Now there is a new debate brewing over whether a proxy holder can vote at their own discretion if the proxy giver does not provide explicit instructions.

What’s all the controversy about?

Well it all boils down to the first box on Page 2 of the prescribed proxy form which provides the owners two options.

The first option gives authority to the proxy holder to only vote on matters of routine procedure and nothing else. The second option grants the proxy holder the ability to vote on all matters based on the instructions filled out by the owner on subsequent pages. But, what is not clear is what happens if the owner checks off the second box but leaves the subsequent pages blank (eg. provides no instructions).

The ambiguity of the wording in option two has opened up two different interpretations - those that say that the absence of instructions allows the proxy holder to vote on those matters at their discretion and those that say they do not.

Those that say “Yes” to discretionary voting

Some law firms have the view that, if there are no instructions given, then the proxy holder has the right to receive a ballot to vote on all matters. The reasoning behind this can be attributed to the amended Condo Act no longer requiring owners to identify who the proxy will vote for, and the language within the second option allows for the proxy holder to vote on all matters.

Those that say “No”.

Those on the other side of the argument point out that the new prescribed form was supposed to provide an extra layer of assurance against proxy fraud by having an owner sign or initial beside their vote. They are of the view that a proxy holder should not receive a ballot or vote for voting in a director if a field is left unsigned. However, in matters related to the removal of directors and votes for bylaws, owners may provide their instructions or possible defer to the proxy holder..

What is GetQuorum’s Take?

Fortunately it doesn’t really matter what our opinion is, it’s your (or your corporation lawyer’s) opinion that matters. We just make it super easy for owners to complete their proxy, it is up to you to decide whether to give proxy holder ballots or not. We see both sides to the argument, but we can all agree that ambiguity is bad for everyone, especially the owner.

Ambiguity is bad for everyone

When a proxy is submitted, the Meeting Chair needs to be able to definitively understand the owner’s intentions. Consider the situation in which there are two director positions up for election. If the owner filled in one candidate’s name but left the other blank, does that mean they have decided to only choose one director, but not the other? Or has the owner chosen to give their proxy holder discretion to choose the second one? How would you, reading the proxy, be able to make that determination?

Without further clarification from the owner, the Meeting Chair would not be able to determine if the owner only intended for only one or both of their votes to be cast.

The Condo has the advantage

As a convenience for owners, many condo corporations will pre-fill the proxy form with a default proxy holder, usually the condo board president. If a proxy holder is allowed to vote on all matters, then the corporation can use these unfilled proxies to their advantage when it comes to making decisions that benefit the corporation, like voting for a director that more aligns with their views (which can open up more opportunities for fraud). If the amendments to the Condo Act were meant to improve consumer protection, then providing a condo corporation the advantage flies in the face of that purpose.

A Rude Awakening for Owners

Most owners don’t understand the importance of attending their AGM let alone the intricacies on how to complete a proxy form properly. So it would be reasonable to conclude that owners wouldn’t know that the consequences of leaving a proxy with blank fields will allow the proxy holder the ability to vote on all matters (not stated anywhere on the proxy form).

An Experiment

GetQuorum is fortunate to be located in a co-working space for other legal technology companies. We asked a small sampling (approximately 10) of our colleagues to complete the prescribed proxy, many of whom have never seen it before. After completing the form, we asked if their interpretation of the proxy form allowed the proxy holder to vote in their discretion if the instructions were left blank. 8 out of 10 said “no”. This is far from a scientific study, we wholey acknowledge that this doesn’t prove anything.

Actually it does, all 10 told us how ridiculously complicated the proxy was to complete, it also proves that you can get someone to complete the proxy by offering them a free coffee.

So what can we do?

Proxies are not a novel tool as they have been used in the corporate sector for decades. These proxies contain explicit instructions for what the proxy can and can’t be used for. Perhaps there are lessons to be learned from the corporate sector that can be applied to the way that condominiums handle their proxies.

We have reached out to the Ministry regarding the confusing language in the second option. The Ministry has acknowledged that they are aware of the differing views on how to interpret the proxy and are working on clarifying the language. Will the Ministry add additional options for owners to explicitly defer their vote to the proxy holder and add additional language that states that if an owner’s instructions are not given then the proxy holder has the ability to vote on all matters.

But, a better course may be to prevent votes from being deferred at all. We have seen in our data, that owners will make a choice if they understand what it is they are voting for. It is up to the Corporation to educate their owners on what they are voting for so that they can make an informed decision.

What’s your take on proxy holder voting at condo meetings?

Contact us if want to chat some more about proxy holder voting.

Splash photo by rawpixel.com on Unsplash

JJ Hiew

JJ is a former condominium director and is the co-founder of GetQuorum.com, a corporate governance platform specializing in electronic voting, proxy voting and notice distribution service.

Toronto