Applying A Retail Voting Program in Practice

On September 15, 2025, the Office of Mergers and Acquisitions of the SEC’s Division of Corporation Finance permitted a novel approach to increase retail shareholder voting when it granted a no action letter request from Exxon Mobil Corporation.

Specifically, the SEC was asked to consider whether a proposed retail voting program was compliant with Rules 14a-4(d)(2) and 14a-4(d)(3) (the “No-Action Letter”). In the No-Action Letter, ExxonMobil sought confirmation that the SEC would not recommend enforcement action if it implemented a retail voting program allowing retail shareholders to provide standing instructions for their shares to be voted automatically in line with the board of director’s recommendations at each shareholder meeting. 

Notably, the No-Action Letter stated that of the nearly 40% of the company’s outstanding shares that were held by retail shareholders, only one quarter of those shares (or approximately 10% of the outstanding shares) were voted at its last annual meeting. The company also advised the SEC that it had “long received feedback” from retail shareholders that they would be amenable to standing voting instructions to vote as the board recommends. Consistent with this, the No-Action Letter stated that, of the retail shareholders who voted at meetings over the last five years, approximately 90% supported all of the board’s recommendations.

Why This Matters

The No-Action Letter has resulted in a frenzy of interest in duplicating the program.  Public companies with a significant retail shareholder base routinely face voter turnout issues.  The consequences of low voter turnout can range from mild – prolonged company efforts to get votes in to meet quorum – to highly significant, when critical proposals are approved or not approved by a small margin. For example, obtaining the support of retail investors can play a key role in approving corporate transactions or a company’s nominees in a contested election.

Applying the No-Action Letter in Practice

Companies considering whether to implement a retail voting program should undertake the following steps:

Step 1: Understanding the Shareholder Base

As noted above, in the No-Action Letter, ExxonMobil established that it had high levels of (i) retail investor ownership and (ii) failures to vote by a large portion of such retail investors.  In addition, the request demonstrated a historic alignment between the board’s recommendations and voting patterns of retail investors actually submitting votes. It is unclear from the SEC’s response whether it weighed these quantitative inputs in determining to grant relief.  Companies considering such a program should investigate the levels of retail voting (which may not be clear in regular voting results given holdings by various broker dealers) and will want to consider how much movement there is in retail voting. A key goal of any program should be fostering engagement with retail investors.

Step 2: Determining Whether a Retail Voting Program will be Effective

Once the size and voting behavior of the retail investor base is understood, companies should consider how effective a retail voting program may be in helping meaningfully improve retail investor engagement over the long term, including participation in voting and potentially to help pass, or pass at higher levels, management proposals, before they decide to adopt such a program. A company with a significant concentration of votes with several large institutional shareholders or high levels of institutional holders may find that the retail program will not substantially impact voting outcomes.

Further, companies will want to consider how much movement there is in their retail investor base. Maintaining an effective program will depend on the company’s ability to have proxies as of a particular record date. If there is significant movement in the retail base throughout the year, the company will need to engage in continual program enrollment, the program may not be as effective as anticipated as a result. Similarly, the program permitted by the SEC requires that retail investors be allowed to opt out of the program at any time and override voting instructions in particular votes, which would allow movement in voting out of a program.

This illustrates a further consideration: companies will need to invest in significant long-term engagement with retail investors to implement, refresh and maintain a program. The platform and communications to get investors to opt in as well as annual reminders may not be insignificant from a process, administrative and, potentially, cost perspective.

Step 3: Determining the Design of the Program

The program designed by ExxonMobil had a number of unique features as summarized below in the Appendix: “Key Features of the Retail Voting Program.” Companies considering whether to implement a retail voting program should consult their internal and external corporate counsel, particularly if the desired retail voting program would require features that differ from those addressed in the no-action request and the SEC’s response.

Notably, there are two specific drafting considerations that companies, particularly companies incorporated in Delaware, should keep in mind when designing a retail voting program.  First, under Section 212(b) of the Delaware General Corporation Law, a proxy is only valid for three years “unless the proxy provides for a longer period.”  Therefore, proxies to be granted by retail registered owners should specify that the proxy remains in place; for example, until such time as the proxy giver opts out of the program.  Second, under Delaware common law, a proxy is revoked either by (i) a later dated proxy or (ii) the proxy giver voting the shares at a meeting.  To ensure the standing instruction survives a one-time override due to a subsequently voted proxy, the terms should clearly provide that such action does not effect a full revocation of any standing instruction.

Step 4: Determining Shareholder Sentiment

Companies are also advised to understand how such a retail program will be perceived by their shareholders before adopting the program. To date, none of the major proxy advisors or institutional investors have commented on this program, but recently two ESG focused funds requested that the SEC reconsider the No Action Letter decision, arguing, among other things, that the program undermines shareholder rights. In the absence of any meaningful guidance from proxy advisors and large institutional shareholders, companies should consider engaging with their shareholder base, including their retail shareholders as ExxonMobil did, in determining whether a program is appropriate for them.

Conclusion

Companies with a substantial retail investor base who have lost, or are at risk of losing, significant proposals due to low retail investor turnout could benefit substantially from adopting a retail voting program. However, before doing so, they should consult with a number of advisors, including legal counsel and their proxy solicitor to determine whether such a program makes sense for them given the cost, design considerations and time and effort needed to effect such a program.

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Morris Nichols partner Kyle Pinder, along with Cleary Gottlieb partners J.T. Ho and Helena K. Grannis, co-authored this article.

These materials have been prepared solely for informational and educational purposes, do not create an attorney-client relationship with the author(s) or Morris, Nichols, Arsht & Tunnell LLP, and should not be used as a substitute for legal counseling in specific situations. These materials reflect only the personal views of the author(s) and are not necessarily the views of Morris, Nichols, Arsht & Tunnell LLP or its clients.

Appendix: Key Features of the Retail Voting Program

The SEC response informed ExxonMobil that it would not recommend enforcement action if it implements the retail voting program with the features described in ExxonMobil’s request. In granting such relief, the SEC’s response noted specific features “in particular,” which are noted with asterisks below

• Retail Investors Only.* The program will be available to all retail shareholders, including registered owners and beneficial owners who own shares through a bank, broker or plan administrator. The program will not be available to registered investment advisors exercising voting authority over client securities.
• No Cost Opt In.* Retail shareholder may enroll in the program at no cost.
• Voting Options. Retail shareholders opting to participate will have the option to decide whether their voting instruction is to vote as the board recommends either (i) on all matters, or (ii) on all matters other than contested elections or mergers, acquisitions or divestitures requiring a shareholder vote under applicable law or stock exchange rule.
• No Cost Opt Out.* Participants will be able to opt out of the program, at no cost, at any time; provided that if a participant elects to opt out after the company files its definitive proxy statement for a meeting, the opt out applies to all future meetings, but not the upcoming meeting.
• Case-by-Case Override.* In addition to an opt out ability, participants will be able to “override” the votes to be cast pursuant to their standing instruction by voting using the proxy materials received for a meeting. A participant can exercise this override at any meeting.  In addition, if a participant desires to fully opt out of the program, but does so after the deadline for a meeting, it can nonetheless nullify the voting instruction for such meeting by voting using the proxy materials received therefor.
• Annual Reminders.* The company must send annual reminders reminding participants that they are enrolled in the program and have given a standing voting instructions, including explicit language informing participants that they have the ability to opt out at future meetings. This requirement helps avoid criticism that retail shareholders will just “set it and forget it.”
• Disclosures.* Participants will continue receiving proxy materials for meetings, thereby ensuring they can override any voting instructions at a specific meeting by voting using the proxy materials. Proxy statements will fully disclose the program as well as the ability of participants to opt out or override the standing instructions. The program will also be fully disclosed on the company’s website.
• Voting Mechanics. Voting and administrative actions related to voting under the program, including communications between the company, brokers and shareholders and the opt in/opt out portal, will be facilitated by the company’s vote processing agent.
• Communications and Confidential Information. The company will communicate about the program directly with registered owners, and indirectly with OBOs and NOBOs through their brokers. In addition, any information contained in the vote processing agent’s systems, such as that relating to OBOs, will not be disclosed to the company as part of the program.