A Closer Look at Votes Against Auditor Ratification

While shareholders have the option to vote on their company’s auditor, the outcome is almost never in dispute. A recent analysis of shareholder votes filed between January 1, 2015, and December 31, 2017, shows that, on average, 98.7% of votes were cast in favor of auditor ratification. The remaining 1.3% is comprised of votes against auditor ratification (0.9%) and abstained votes (0.4%). Similarly, in our last analysis of auditor ratification votes, we found that 95 out of 100 times, fewer than 5% of votes were cast against the auditor.

The table below magnifies the outcomes of the 0.9% of votes against auditor ratification over the past 3 years.

There were 8,154 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 22 companies had more than 25% of the total votes cast against ratification, none of which voting against exceeded 49.0%. (See table below.)

That said, sometimes shareholders – for whatever reason – vote in large numbers against the ratification of the auditor. Over the last three years, the largest percentage of votes against auditor ratification has decreased.

In 2017, there were fifteen companies with more than 20% of votes against ratification. Planet Fitness, Inc. [PLNT], Consolidated-Tomoka Land Co. [CTO], and Kulicke & Soffa Industries, Inc. [KLIC] top this list, each having more than 36% of votes against auditor ratification.

While shareholders’ votes carry advisory power, the Board of Directors is under no mandatory obligation to take voting results into consideration. All five companies mentioned above have reappointed the auditor despite shareholder objections.

Keep in mind, this is a magnified analysis, as votes against ratification only comprise about 1% of the total votes.

For more information about Auditor Ratification, or for a complete list of companies having the highest percentage of votes against, please contact us at info@auditanalytics.com.