CORRECTION: This article, originally published at 12:37 p.m. on Thursday, May 21, has been updated to correct the size of Equality Network Foundation's holding in Goldman Sachs in the second paragraph.
NEW YORK (TheStreet) - When Goldman Sachs investors gathered in San Francisco on Thursday for the company's annual meeting, one item on the agenda was making sure their votes matter.
The Seattle chapter of Equality Network Foundation, which owns 20 shares of Goldman Sachs valued at about $4,000, urged the bank to begin using a simple-majority system to determine whether all proposals -- whether from management or shareholders -- pass or fail.
Under Goldman's (GS) current plan, the foundation says, board members proposed by management are elected if the number of supporting votes is larger than the number opposed. Votes to abstain are ignored. The system is different for all other proposals: Votes to abstain are counted as votes against.
"This proposal is needed because Goldman Sachs counts votes two different ways in its proxy," Equality Network argued, "a practice we feel is confusing, inconsistent, does not fully honor voter intent, and harms shareholder best-interest."
Equality Network see two problems with the bank's voting procedures. First, ignoring abstentions for the election of directors may artificially inflate the support they receive. Second, counting abstentions for others proposals -- including all those submitted by shareholders -- makes it more difficult for them to pass.
"This is a typical 'heads, I win; tails, you lose' rule, designed to discourage shareholder activism," said John Coffee, director of the Center on Corporate Governance at Columbia University School of Law. "Conceivably, the SEC could stop this, but don't hold your breath waiting for them to act."
As it turned out, most of the company's shareholders didn't share Equality Network's concern: its proposal garnered only 5% of votes. Goldman Sachs has about 400 million shares outstanding and a market value of about $93 billion.
The bank is not alone in how it counts -- or doesn't count -- shareholder votes. Equality Network filed a similar proposal with JPMorgan Chase (JPM), which only received 7.4% of votes at the New York company's shareholder meeting on Tuesday.