Investors Ignore Systems of Democratic Governance

A 2017 proxy survey performed by Broadridge and PwC found that individual investors only vote 29% of the time. Also, they found that institutional investors (pensions, funds) are 2x - 3x more likely to support a shareholder resolution. When individual investors do vote, they consistently vote with recommendations from management.

Does this mean that individual investors are:

A. Highly trusting of corporate management
B. Disengaged
C. Powerless
D. (B & C)

With such a low voter turnout, it’s hard to see how Option A could be correct. The Edleman Trust Barometer reveals that civic trust in business is dropping.

On the issue of proxy access, the absence of retail investor proxy support is most evident.

Proxy access is shorthand for allowing shareholder Board of Director nominations on the same proxy voting cards that come from corporate management. Without this rule in place, investors have to go through a very confusing and expensive process of creating a second competing proxy statement. Have no fear, these new resolutions do not empower in-and-out corporate raiders. Most have a 3 and 3 rule that limits nominations to those investors or groups of investors with at least 3% of the shares and who have all held this stock for at least 3 years. For the most part, these proxy access rules are common sense and should be enacted - with our without individual “retail” investor support.

Environmental-related shareholder proposals have been generally focused on encouraging carbon emitters to model the impact of increasing government regulation.

It may be difficult to imagine how international commitments to environmental efficiency could have anything to do with American energy companies under the current presidential administration but investors at Exxon recently and resoundingly passed just such a resolution. This may come as a big surprise to some but it seems that a significant number of investors have a longer time horizon than a presidential term.

In a recent article by one of my favorite financial reporters, Gretchen Morgenson, she argues that the industry desperately needs to better empower individual “retail” investors with technology that will make voting easier. If such a technology existed, individual investors could select the corporate governance leader of their choice to cast their votes alongside. I already know who i would pick: CalSTERS, a public pension representing California teachers and steward of the common good.

-Data from ProxyPulse, a Broadridge and PwC Initiative, 2017 Proxy Season Review

Matt Illian