Posted: August 12, 2008

Do We Need a Box for "Abstain"?

The just-completed election for seats on the Yahoo board of directors featured a contest between “yes” votes and “abstain” votes on the Yahoo proxy forms. There was no alternative candidate on the proxy or any other proxy and there was no box for a “no” vote. Notably, the CEO of Yahoo, who had successfully blocked an acquisition by Microsoft, collected over a thirty percent abstain vote from all shareholders voting. This is a remarkably high number and a statement by a substantial number of shareholders that they were displeased with the CEO’s performance. In uncontested elections the normal percentage of abstain votes is less than three percent.

The abstain vote was all the more startling because it came on the heels of a settlement of a dissident shareholder proxy contest. Carl Icahn, one of our longest-engaged and best known activist hedge fund operators, had fielded a slate of candidates for the board and was soliciting votes. A few weeks before the election, Icahn withdrew his challenge and accepted the management’s agreement to nominate him and two delegates to Yahoo board seats. Shareholders who would have voted for Icahn's dissident slate were left only with “abstain” votes for incumbent insiders who had blocked the Microsoft deal.

The Yahoo dissident shareholders were upset that the Yahoo CEO and board had not accepted a Microsoft acquisition offer that was, in value, considerably higher than the trading price of Yahoo stock, unaffected by rumors of the merger.

Those who ridicule a “just say no” campaign with only an “abstain” vote note that one yes vote outweighs any number of “abstain” votes. One check in the yes box on one proxy and 999 checks in abstain boxes on all other proxies puts an incumbent back on the board for a year. They overlook the power of the poll on stock prices (all abstain voters are potential sellers of the stock), and on the next annual election (when a hedge fund may be encouraged to run a dissident slate).

Faced with an election for President of the United States in November I am in the uncomfortable position of not feeling able to vote for any candidate running when I show up to vote. And I will show up; voting is important to me. I can simply leave the President line (or box) blank and vote for others. But this is an admission of defeat; I want to vote. Or I can attempt a write-in, which will test my patience and the patience of the poll workers who must handle my ballot specially.

I would relish the chance to vote formally for “abstain” on the Presidential line on the ballot. I suspect that I am not alone. I would vote. I could be heard. And it would be the vote I want recorded. I do not want the absence of a recorded mark to be my vote.

The number of “abstain” votes in any given election would provide a real choice for voters and also provide real information for political parties, election statisticians, and pundits. So I offer another “no chance” academic recommendation: Add an “abstain” box to the ballot in all elections, for all candidates, and on all ballot issues.