U.S. Proxy Voting Manual
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Bundled Proposals

Vote bundled or "conditioned" proposals on a CASE-BY-CASE basis taking into account the aggregate effect of the items.

Discussion

Definition of Bundled Proposal

A "bundled proposal" refers to any proxy proposal that includes a number of separate elements. Some bundled proposals are fair and straightforward, involving various elements that belong together both logically and functionally. When a company reorganizes, for example, shareholders may be asked to vote on a number of major changes, including bylaw and charter amendments, perhaps an asset spinoff, and other related items. In these cases, it is usually clear that the bundled items are part and parcel of a major corporate restructuring.

Unrelated Bundled Proposals

However, certain bundled proxy proposals combine unrelated issues that should be presented as separate voting items. In the past, ISS has evaluated management proposals that bundled antigreenmail provisions with takeover defenses, bundled director stock option plans with executive stock option plans, and bundled dividend payments with adoption of poison pills. Some companies have deliberately used these types of proposals to manipulate the vote in order to pass a questionable proposal by bundling it with a proposal that would likely pass on its own-a strategy similar to the use of riders and amendments in legislative packages.

To protect shareholders from coercive or confusing bundled proposals, the SEC's 1992 proxy reforms require companies to unbundle unrelated items of business. Unfortunately, companies are still able, depending upon the state in which they are incorporated, to submit unrelated business items as separate proposals and condition the passage of one on the passage of another.[1] This technicality may permit companies to effectively bundle proposals. In addition, the decision concerning what constitutes related material must ultimately be a somewhat subjective one, and may result in some issues being bundled that shareholders would rather see separated.

In the case of items that are conditioned upon each other, as may still happen, shareholders should examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in the best interests of shareholders, vote against the proposals. If the combined effect is positive, support such proposals.

Notes

[1]

An SEC Fact Sheet, dated Oct. 15, 1992, provides: "If permitted by state law, the company may still condition adoption of any proposal on the adoption of other proposals." In the absence of a state law allowing conditioning, companies may not engage in such a practice.

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