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A Closer Look at Votes Against Auditor Ratification – 2019

Note: This post was updated to reflect a change in the first table (Highest % Votes Against per Year). The original table incorrectly included Dynasil Corp of America as having the highest percentage of votes against in 2018.

An analysis of shareholder votes filed between January 1, 2017, and December 31, 2019, shows that, on average, roughly 98% of votes were cast in favor of auditor ratification. The remaining 2% is comprised of votes against auditor ratification (about 1.7%) and abstained votes (roughly 0.3%), with the percentage of votes against increasing since our last analysis of auditor ratification votes. However, we found that 96 out of 100 times, fewer than 5% of votes were cast against the auditor.

The table at right is a frequency distribution analysis of percentage votes against auditor ratification, magnifying the results of the 1.7% of votes against auditor ratification over the past three years. That is, the table shows the number of auditor ratification proposals in which the percentage of votes cast against ratification fell in the given bins.

There were 7,274 ratification proposals, for example, in which the votes against ratification were between 0% and 1.00% of the total number of votes cast. In all, about 96% of auditor ratification proposals had 5% or less of the votes cast against ratification. On the other hand, shareholders of 30 companies had more than 25% of the total votes cast against ratification, none of which voting against exceeded 45.0%. (See tables below.)

To put it in a different perspective, see the histogram below. This graph, showing the same data as the table above, displays how frequently and resoundingly the auditor is ratified. This suggests that the rare cases in which shareholders voice significant disapproval of the auditor are probably worth a closer look.

Over the last three years, the largest percentage of votes against auditor ratification has remained right around 40%.

In 2019, there were eleven companies with more than 20% of votes against ratification. Dean Foods, Impinj, and Ecology & Environment top this list, each having more than 36% of votes against auditor ratification.

Both Dean Foods and Ecology & Environment had previous significant votes against auditor ratification. In 2018, 5.09% of Dean Foods shareholders voted against ratification of the company’s auditor, while in 2017, 28.03% of Ecology & Environment Class B shareholders voted against the ratification of the auditor.

Looking at the highest votes against auditor ratification among the S&P 500 in 2019, we see lower percentages. However, these amounts are certainly significant enough to trigger a flag – especially among this group of companies.

Several of these listed companies have faced significant votes against the ratification of the auditor for years. For UDR, votes against auditor ratification have remained high since 2012, when 9.25% of shareholders voted against ratifying the auditor. Since then, this figure has fluctuated, ultimately reaching a high of 13.44% in 2019. Alternatively, 11.30% of shareholders voted against the ratification of General Electric’s auditor in 2019, a substantial decrease from the 34.94% in 2018.

The table below shows the top ten companies with the highest percentage of votes against in the last five years.

While shareholders’ votes carry advisory power, the Board of Directors is under no mandatory obligation to take voting results into consideration. With that said, of the companies listed in this post, Impinj was the only company to switch auditors following the significant votes against ratification; all others reappointed the auditor despite shareholder objections.1

Keep in mind, this is a magnified analysis, as votes against ratification only comprise about 1.7% of the total votes.

For more information about Audit Analytics or this analysis, please contact us.

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1. Ecology & Environment,, and Amber Road each terminated their SEC registration.

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