If you use a margin account then your broker can lend out your shares since you possible haven't actually paid for them all. Read the margin agreement that you signed. You don't get to vote those shares because the actual shares have been lent. The rules are clear and spelled out. If your shares are lent you can't vote or you might not be voting them all.

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I don't know if you are correct or not. I do know your answer makes sense. Also I contacted my broker and ended up talking with their resource people this evening. They don't know!

The problem crops up in two (2) forms at least.

1) Dividends. The chap who holds the short position is on the hook for the dividends. This can be handled with a debit. Problem solved.

2) Votes. The guy hemmed and hawed and in the end he admitted he does not know the "mechanics". He seemed to think different houses handle this their own way. Hmmm.

He seemed to think they go into the market on the day of record and close the short position. To me this seems very unlikely because the logistics would be quite the thing... then if we have as you say a company with a large short position this might not even be possible.

You suggest that some people might not get to vote.

That might explain some people in this forum not getting their proxies.

Still - I would think there might be a rather large hue and cry... from a NUMBER OF STANDPOINTS.

Suppose this vote is very close... the loosing side is bound to cry foul if shareholders start to step forward claiming their votes were denied and this would have made the difference.

Then we have the hidden number of shares which the people tallying the votes see... numbers which we cannot see and which conceivably might not match what is printed on the paper we see. Of course audits would reveal this and it would be nigh on impossible to hide it... unless its institutionalized and people shrug their collective shoulders and say its always been done this way.

I thought maybe virtual votes might be created. Since I do not know the mechanics I think this is a possibility... and if so then the system is badly broken... but then we already know about naked shorts which are illegal.

However it goes... your explanation looks to be quite plausible. I do not have a margin account and thus I cannot verify what you suggest. As I advised.. I called my broker and asked their resource people and they didn't know.

At this point I think we need to confirm the mechanics of the system. I'll call the university tomorrow. One of the prof's might know. Perhaps others should follow whatever clues they have and it would be nice to come back with an authoritative answer perhaps with references. You see the thing is that in my career I have often come across wrong answers and wrong assumptions and wrong ideas and often from people who are professionals and many hold Phd's... so I've learned to ask lots of questions.

The importance to us is that if we have a system full of holes... which as we all know... most computers are full of holes (and spyware) then I don't want us losing our company and the opportunity of a lifetime because of this. If we have a problem then lets prove it and get it into the open.