Shareholders 1, Board Bozos 0

Imagine if the votes of every American who didn't show up on Election Day went to the incumbent party. That's how out-of-whack our shareholder democracy is today.

At the Fool, we've long encouraged shareholders to get out and vote each proxy season. As part-owner of a business, it's in your interest to keep an eye on the Board of Directors, and vote against the members if you suspect them of negligence in their fiduciary duties. There are also crummy compensation plans to oppose, such as the one floated by offshore engineering outfit Acergy (Nasdaq: ACGY) last year.

Unfortunately, the reality is that more investors probably vote for their favorite American Idol than file a proxy. The problem goes beyond feeling like your vote doesn't matter in the grand scheme of things. Often, it literally doesn't matter, because most board slates run uncontested. Even in the tiny minority of contested elections, the odds are always stacked against challengers -- thanks to a certain Rule 452.

In 1937, the New York Stock Exchange adopted this rule, allowing brokers to vote on routine matters on behalf of their clients. Over the decades, the definition of "routine" has been altered many times, but until now, the election of directors has fallen under that rubric.

No longer. After years of study and debate, and a 3-2 decision at the SEC last week, NYSE members will not be allowed to vote for corporate directors without instructions from their clients beginning Jan. 1, 2010.

This is a big deal, my Foolish friends.

I can't imagine how many value-torching decisions have coasted through with the patina of shareholder approval provided by broker voting. Ditto for incumbent Board bozos. Bank of America (NYSE: BAC) is a disaster, and dissident shareholders just barely squeaked out a victory in the separation of CEO and chairman roles at the end of April.

Without the broker votes, major corporations such as Intel (Nasdaq: INTC), Home Depot (NYSE: HD), and PepsiCo (NYSE: PEP) are suddenly facing a majority vote standard with some teeth. Now, if only mutual funds would be prevented from carelessly voting their clients' shares, things could get really interesting.

I suggest you ignore the protests about unfairly empowering short-term-oriented activist hedge funds. The same bugbear has justified all sorts of devious devices, from staggered boards to poison pills. I much prefer keeping the incumbents on their toes. Ring this one up as a victory for shareholders big and small. And don't forget to vote!