DOL Reverses Position on Voting Pass-Through

The Department of Labor seems to have reversed its opinion on pass-through of voting rights in companies that provide "mirror voting and tendering" provisions on unallocated shares. The Department has always said that trustees can follow employee directions for voting and tendering allocated shares, but has argued that trustees must make an independent decision for unallocated shares. The trustee can look to employee directions on these shares, but cannot simply make a decision based on them. In a lawsuit against the trustee for Polaroid's ESOP (NationsBank), the DOL argued against the plan's provisions directing the trustee to vote or tender unallocated shares and undirected shares based on the way allocated shares are voted or tendered. The trustee should have made an independent decision, the DOL said, and the court has agreed (the case is now on appeal).

Now in a September 28, 1995 letter to Ian Lanoff, a lawyer representing the AFL-CIO, Olena Berg, an assistant secretary at the DOL, said the trustee should in fact follow employee directions on unallocated shares unless there is a "compelling reason" not to do so. How the two contradictory positions will be reflected in future DOL actions is not clear.