Proxy Voting in the Digital Age
- 08:58 AM EDT
commentary is from an investment professional with
Clear Harbor Asset Management who is a participant in TheStreet's expert
NEW YORK (TheStreet)
-- Do you own stock in a company that is holding its annual shareholders'
meeting this spring at a place or time that doesn't fit your schedule? Visit
the investor relations page of the company's Web site and see if it will be
webcasting the event. If not, fire off an email complaint to the firm's
investor relations contact or take to your favorite social media network to
demand a webcast.
The Securities and Exchange Commission currently doesn't require companies
to webcast their annual meetings, but many public companies are doing this,
and all of them should. In the digital age, there is no reason why
shareholders should have to be physically present at their company's annual
meetings to monitor what goes on and participate.
Last week, I wrote about the importance of the annual shareholders' meeting
for investors trying to make intelligent decisions about where to allocate
their capital. Now, let's look at how the rise of the Internet is making
these meetings more accessible, and why that's a good thing.
The proliferation of the webcast is the obvious place to start, but this
development has a long way to go. Some companies are still not webcasting
their annual shareholders' meetings, and many that are only make a live
stream available when they should be archiving the recording on their Web
site so people can listen whenever and wherever they want.
As digital technology progresses, videos of corporate shareholders' meetings
will be made available on the Web, and people will be able to watch the
proceedings, vote their proxies and even ask questions from remote locations
on devices and sites provided by tech companies like Apple and Google.
Voting results will be posted online in real-time, and proxy access will be
more widely available. Won't such developments make these meetings less
efficient and more chaotic? Yes, they will, but the changes I'm describing
are inevitable, and I expect the resulting positives to far outweigh the
Major corporations have become some of the most powerful institutions in the
world, but along with that power comes criticism, and shareholders' meetings
are clearly an opportune time for people to voice their criticisms. Annual
meetings have always attracted activists pursuing agendas that have little
relevance to the interests of shareholders, and the digitization of
shareholders' meetings will exacerbate that.
However, the neglect of genuine shareholder interests in the boardrooms of
corporate America is a far greater problem than a few digressions at annual
shareholders' meetings. Shareholders themselves are largely to blame for
this due to their lack of participation, but digital advancements that make
the proxy process more accessible and transparent could remedy that.
New York Times
columnist Gretchen Morgenson recently presented early
evidence that "say on pay" votes -- non-binding votes on executive
compensation policies that are now required of public companies by federal
law -- are having a positive impact at companies like Stanley Black & Decker
and Johnson & Johnson. She noted, though, that "for every active shareholder
who votes for change, thousands of passive ones remain disengaged. Votes
that abstain, are never cast or that are delegated to brokerage firms to
vote, typically in support of management, still make up a lot of the proxy
Shareholders have to assert themselves more as owners of public companies.
Paragons of American capitalism, like Vanguard Group founder John Bogle and
oil tycoon T. Boone Pickens, have long called for this, but the Internet and
social media promise to turn the vision into reality.
Professional shareholder activists are already using the Web as a new weapon
in their arsenal. Daniel Loeb, manager of the hedge fund Third Point, has
set up a Web site at ValueYahoo.com as part of his high-profile campaign
against Yahoo!'s board of directors. Likewise, Bill Ackman's Pershing Square
has launched CP Rising in its effort to replace board members at Canadian
Meanwhile, smaller investors are also harnessing the Web to achieve greater
scale and more influence. Kenneth Steiner, an activist investor who has put
forth hundreds of governance reforms over the years, recently used the site
proxyexchange.org to submit proposals at Bank of America and Sprint among
Launched in 2009, the shareholder activist site MoxyVote now has 165,000
users, and according to Jessica Clarke, a company representative, it's
growing by 15,000 to 20,000 users per month.
Shareholders can join MoxyVote for free and vote their proxies
electronically, and they can link MoxyVote to their brokerage account to
vote proxies online more conveniently. Also, through the site's relationship
with Broadridge, an investor communications firm that many companies use to
deliver and receive proxies, MoxyVote can show its users how different
influential advocacy organizations voted their shares. Users can choose to
automatically align their votes with organizations like the Unitarian
Universalist Association, the Nathan Cummings Foundation, Trillium Asset
Management and others.
In a sign of its early success, JNJ recently agreed to compensate MoxyVote
in order to use the site as a conduit for communicating with shareholders.
Don't be surprised to see more companies embracing social media as part of
the proxy process.
They have no choice.
Disclosures: Worden and/or his firm own positions in JNJ, AAPL, BAC, S and
GOOG, but not in any of the other stocks mentioned in this article.
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