Shareholder voting is a hugely important part of investing, and yet it's really hard to navigate. Here’s a guide breaking it all down, what the problems are and what you can do to be heard.
The words “proxy voting” sound about appealing as, say, “sodium count” or “listserv management software” and, accordingly, it’s not a phrase that’s exactly woven itself into our everyday lexicon.
But despite its unappealing name, proxy voting—or the ballot shareholders send in via email or mail to vote on major decisions affecting companies they invest in— can have a substantial impact on how companies operate. It’s also a right every shareholder has, from those with massive stakes to a single share.
Even though proxy voting is an essential part of investing and a powerful tool for holding the companies you invest in and its executives accountable for their actions, very few retail investors (or regular, everyday shareholders) vote.
And it’s pretty easy to see why: The way that the voting system currently works—and how ballots and voting information are given to shareholders—needs a revamp. The world of proxy voting and the confusing, garbled structure it uses to “count” shareholder votes has become a hotly debated topic in recent years, with regulators, companies, investors and shareholder advocacy groups calling for change. (More on that later.)
Below, a guide to how to proxy vote, why it matters and possible changes on the horizon.
In short, proxy voting is when a shareholder who cannot go to a company’s annual shareholder meeting or a special meeting votes by mail or email. Once upon a time, shareholders typically attended a company’s annual shareholder meeting and voted in person, but, as investors have spread out geographically over time, getting every shareholder or even many shareholders to a company’s annual meeting is unfeasible. Enter proxy voting, or voting remotely.
Typically, anyone who owns a voting share in a public company as of the company’s record date (i.e., the date set by the company as to when the investors must be on the company’s books), or the number of days preceding the company’s next shareholder meeting. That number is set by the company.
All kinds of topics that matter, from who gets elected to a company’s board of directors and how diverse it is, to how much a CEO is paid and why—increasingly hot-button topics among investors as well as politicians. Shareholders can also vote on proposals related to a company’s social responsibility, including climate change and carbon emissions, gender equity and human rights (like labor violations or conditions in its supply chains).
You can vote via email or snail mail, and typically do so via your broker.
It depends on when the company’s annual shareholder meeting is or if a special meeting has been called that shareholders can vote in (which might be at any time). Typically, 35 to 40 days ahead of a shareholder meeting, a company will send out a proxy ballot and a “proxy statement” with management and shareholder proposals to be voted. The cutoff to vote is generally 24 hours before the shareholder meeting.
No. Many emailed proxy ballots and mailed paper ones end up in shareholders’ trash because they simply look like spam or are delivered in garbled proxy-ease that read like the Peanuts teacher is talking. It’s not surprising that retail shareholders typically vote at lower rates, with only 27% retail shares voted annually. That's compared to powerful institutional shareholders who represent pensions, asset firms or mutual funds (e.g., your 401(k)) and vote 91% of their shares.
They’re brought forward by the company’s management and its shareholders. Sometimes a proposal might be brought by a hedge fund who has taken a big stake in the company—also known as “activist investors”—and doesn’t, say, want the company to merge with another that they think would bring share prices down. Activist investors are generally interested in buying up shares to force a company’s hand to make strategic business changes that they believe will improve returns or a bottom line.
Other times, proposals are filed by everyday shareholders—you need $2,000 in shares and to have owned them for a year to file a proposal—or “institutional investors” like pensions, unions or an organization of shareholders that may have a shared ideological stance.
Groups of shareholder activist nuns have been pushing back against Wall Street over its investments in the tobacco and gun industries for years. In 2018, The Sisters of St. Joseph of Brentwood brought a resolution against Amazon, asking them to better assess its facial recognition technology for its potential civil liberties and human rights risks before continuing to sell the product to law enforcement or ICE. Though Amazon asked to have the resolution left off its ballot at its 2019 shareholders meeting, the SEC said it must be included.
Although retail investors can be the swing vote in close contests, there’s no “have to” when it comes to how a company responds to shareholder proposals. Even proposals that get majority support from shareholders are non-binding.
But! Getting a company’s attention doesn’t always require a proposal getting a windfall of shareholder voting support. Often shareholder resolutions don’t make it to the ballot or are “withdrawn” because companies agree to take action on the topic before it gets put to a vote. In other cases, companies have agreed to make changes on voted-for resolutions, despite them not getting majority support. McDonald’s recently did, agreeing to phase out foam styrofoam packaging even though a shareholder resolution urging them to do so received minority support vote of 32 percent.
Yes. Also, think of it this way: Companies often listen to the wishes of shareholder votes as a matter of good business and not running the risk of shareholders divesting or withdrawing their support. Don’t forget: shareholders are partial owners of the companies they invest in—ignoring them is not the wisest way for a company to go.
A list of proposals and ballot items will be included on the card, with more detailed descriptions of what you’re voting on in the proxy materials that come with it. Typically, the company’s board will include a recommended vote of “for” or “against” each proposal included, with a statement explaining its stance. (You can read here, starting on page 14, about why Amazon thinks shareholders should vote against proposals asking for more data on Rekognition and not allowing the government to use it, as well against proposals on gender pay gaps and sexual harassment.)
Good question. Do you have 500 hours? In short, for years, shareholders and a range of vested parties in the industry—including companies, banks, brokers and proxy solicitors and tabulators—have been calling for a better way to document end-to-end voting confirmation and improve the “proxy plumbing”. It gets tricky because today’s system and rules prevent most companies from directly communicating with most of their shareholders, requiring intermediaries which leads to inefficiency and confusion.
The SEC intends to prioritize how to streamline proxy voting and improve the count accuracy for both retail shareholders and institutional investors, re-thinking guidance and rules. (A conversation, which Say is an active participant in, is already underway.) Technology, like electronic voting via an email or app that would use a blockchain-based “ledger” system to account for votes might be used to cut down on intermediaries and let shareholders know how and if their votes are actually being counted and their wishes as shareholders represented. Another option is to simply change the rules that prevent companies and shareholders from communicating directly.
Absolutely, 100% yes. Do it. It’s your right as a shareholder to cast a vote and your voice has the power to hold companies and their executives accountable, as well as impact the ways hugely important decisions are made. Additionally, it gives the company the benefit of hearing what you think and gives them a more informed view on what their shareholders think, one way or another.
The confusing voting process is a fixable problem that will change over time. But your voice and your vote is always yours and yours alone. Use it.
