So, it’s 16:22pm the day after after Infineon’s highly contentious AGM. We have the streaming video from the meeting, we have the presentations, we even have a press release announcing the votes “For” the board candidates. But do we have a definitive list of proxy voting results. No. Is the IR department concerned that the media is dealing in Blackberry-market speculation about what actually happened to Hermes’s counter-motion. Seemingly not.

(Update: 17:16 – we now have the results in German and are processing them for analysis)

Occam’s Razor or (Ocham’s Razor), brought to us by 14th-century English logician, theologian and Franciscan friar, William of Ockham, is a theory which suggests that the simplest explanation or strategy tends to be the best one. So what could be the simplest reason behind the non-disclosure?

Could it be that they don’t have the figures? The chairman of the meeting was in possession of the results at the meeting so that journalists could selectively quote from them, so that would not seem to be the answer.

Are the figures subject to verification by the auditors or lawyers? A reasonable supposition but one would wish to question why any results were disclosed to the meeting at all if they were not verified in the first place.

Is it too tricky to update the web-site? This is not a convincing answer as the company has issued a press notice confirming the “Votes in Favour” for the board resolutions. Furthermore, adding streaming videos to the AGM pages is in web terms, significantly more effort than uploading a single page document or spreadsheet. It would probably also undermine Infineon’s credibility as a technology company to admit that it can’t update their website with a single document.

Is it that the Shareholder Rights Directive doesn’t require “immediate publication”? True, but in the circumstances it is somewhat churlish of the company to keep its overseas shareholders waiting for the results in order to comply with the exact letter of a regulation. But such a disclosure strategy is not unheard of.

Is it that the company is trying to hide the “real results”? From past experience of counting German proxy poll results, the PR spin does tend to overlook the negative voting results and focus on the “For” votes, which is of little comfort for those shareholders voting against management and with fellow dissidents.

Looking at Infineon’s articles of association, “Shareholders who do not wish to participate in the voting must notify the chairman of the meeting thereof before the start of the voting, in the form specified by the chairman; in order to calculate the results of voting, only the votes against and the abstentions will be counted; votes of shareholders present or represented who have neither declared their non-participation in the voting, nor have voted with “no” nor have abstained, will be counted as a yes.”

Given that the counter-motion was only added to the majority of Custodian-appointed (and invariable exclusively mandated) voting platforms AFTER the already overly early voting deadline, it would not surprise us if the non-instructed counter-motion votes, or revised ballots had been mis-counted  by the vote tabulator. In which case the company, and Hermes, co-sponsor of the counter-motion should be calling for a “Steward’s Inquiry” into the entire process, no matter how embarrassing, or otherwise, the result might be.

Inquiry or not, it is not reasonable to keep shareholders in the dark. Whether the faults in the proxy tally were at the securities intermediary end or the company end, it would serve the company well to be more forthcoming about the status and legal outcome of the meeting.

The simplest answer, from where we are sitting, is that US-based proxy distribution platforms mandated by custodians are not fit for purpose and are depriving shareholders  not just of of “Best Execution” but “Basic Execution” in corporate governance.

This is not the first time that a US-designed system has fallen foul of “non-standard” procedures. A quick Google for Yahoo and CEO, Jerry Yang’s election reveals “truncation errors” – i.e. the sums didn’t add because the database fields were limited to eight digits (and database error messages ignored). Shareholders of Russian companies may also wonder why their ballots are split across multiple meetings – because that same system cannot cope with 100 resolutions per meeting.

Some US commentators have suggested that the Infineon voting debacle undermines the desirability for a single ballot card for all resolutions, management and dissident. We would argue quite the opposite, for shareholders to have the best opportunity for accurate voting, all the resolutions and counter-motions and their sponsors need to be presented on a single ballot card with clear instructions – and implications – for their completion. But then again, the same US-proxy distributor has made known its views on Universal Ballots – it doesn’t like them. Or is that just a case of “Can’t vote, won’t vote?”

So, the Infineon meeting is not simply interesting because it is a test case for shareholder activism in Germany, it is a test case for whether the foundations and pillars of the proxy process, as currently (mis)-implemented stack up to scrutiny. Clearly not.

So, Lord Myners, while exhorting UK pension funds to get out and vote is extremely laudable, unless they are given the freedom to take the shortest and most reliable route to the meeting, those votes will count for nothing.

Last Updated: 25 February 2010