Recently, the Division of Corporation Finance of the Securities and Exchange Commission (the "SEC") confirmed that it would not recommend enforcement action with respect to Exxon Mobil Corporation’s implementation of its "Retail Voting Program."[1] Exxon’s Retail Voting Program allows all retail investors to grant standing instructions to vote their shares in line with the recommendation of the board of directors on either (1) all matters or (2) all matters except contested director elections or any acquisition, merger or divestiture transaction that, under applicable state law or stock exchange rules, requires approval of stockholders. Retail investors are permitted to opt in to the Retail Voting Program at no cost and may freely opt out at any time. Retail investors may override their standing voting instructions by voting as specified in the proxy materials for a stockholders meeting.
Exxon, in its No-Action Request Letter, drew attention to the fact that New Jersey (Exxon’s state of incorporation) and Delaware state corporate law each permits stockholders to give standing voting instructions that do not expire so long as the instructions specifically state as much.[2] The Maryland General Corporation Law (the "MGCL") provides the same flexibility with respect to the duration of a proxy. Indeed, Section 2-507(b)(2) of the MGCL expressly permits a proxy to remain valid for longer than 11 months if the proxy specifies such extended duration in its terms.[3]
For Maryland public companies struggling with voter turnout, achieving a quorum or low engagement from retail stockholders generally, the SEC’s position should come as welcome news. Companies considering a retail voting program based on Exxon’s model should be mindful that the SEC noted that it particularly relied on the following features of Exxon’s Retail Voting Program in not recommending enforcement action:
- Availability – The Retail Voting Program would be available to all retail investors at no cost.
- Not Available to Investment Advisers – The Retail Voting Program would not be available to investment advisers registered under the Investment Advisers Act of 1940 exercising voting authority with respect to client securities.
- Annual Reminders – Retail stockholders that have opted in to the Retail Voting Program will receive an annual reminder, during the time period when Exxon is not soliciting votes for its annual meeting, of their opt-in status and selection, and will be reminded of their right to opt out and cancel their standing voting instruction with respect to subsequent meetings.
- Right to Opt Out or Override – Retail stockholders will have the right to opt out and cancel the standing voting instructions at no cost, as well as the right to override the instructions with respect to any particular proposal or proposals at no cost.
- Continued Receipt of Proxy Materials – Retail stockholders will continue to receive all proxy materials filed for upcoming stockholder meetings, and the Retail Voting Program will not limit or restrict stockholders from voting at any time using the proxy materials they received for each meeting.
- Full Disclosure of Program – Exxon will make full disclosure on its website and in its proxy statements of the Retail Voting Program.
For Maryland companies evaluating how to address low retail stockholder turnout for meetings, Exxon’s Retail Voting Program offers a useful blueprint. In light of the lead time associated with implementing a retail voting program, a company interested in adopting such a program should begin preparations now in advance of its 2026 annual meeting of stockholders.
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As always, we and our colleagues are available at any time to discuss these or other matters.
- Jim Hanks, Jeff Keehn, Hirsh Ament, Tom Galvin
This memorandum is provided for informational purposes only and is not intended to provide legal advice. Such advice may be provided only after engagement for advice and analysis of specific facts and circumstances and consideration of issues that may not be addressed in this document.
[2] See NJ Rev Stat § 14A:5-19 (“No proxy shall be valid for more than 11 months, unless a longer time is expressly provided therein”); 8 Del. C. § 212(b) (proxies are valid for up to three years, “unless the proxy provides for a longer period”).
[3] The Maryland REIT Law (or Title 8) applicable to Maryland real estate investment trusts and the Maryland Statutory Trust Act (or Title 12) applicable to Maryland statutory trusts similarly do not place any limits on the duration of a proxy.