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Proxy professionals focus on opportunities to win votes of silent individual shareholders

 

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Source: The Wall Street Journal | CFO Journal, August 25, 2015 article

THE WALL STREET JOURNAL   |

 THE CFO REPORT

CFO Journal

3:13 am ET
Aug 25, 2015

The Big Number  

Individual Investors Voting Their Shares Less Often

  

By Vipal Monga

Mom-and-pop investors have grown a bit more passive than they used to be. Collectively they voted just 28% of their shares at corporate annual meetings this spring, down slightly from 29% last year, 30% in 2013 and 31% in 2012, according to a new report from Broadridge Financial Solutions Inc. and the corporate-governance arm of PricewaterhouseCoopers LLP.

By contrast, mutual funds, pensions, hedge funds and other large investors voted more than nine out of their 10 shares this year.

Typically, each share entitles the holder to one vote in board elections and on any other questions raised on a company’s proxy ballot.

Chuck Callan, a senior vice president at Broadridge, says the voting rate among individual investors has declined because of a rule passed by the Securities and Exchange Commission in 2005. The rule gives companies the option of simply notifying shareholders by mail that annual meeting materials are posted on the Internet, instead of mailing them a package that includes a ballot. “It requires the retail investors to take additional steps to vote,” he said. “As a consequence, many don’t.”

Large funds, meanwhile, are amassing a greater proportion of stocks. The percentage of company shares owned by such funds rose to 68% this year from 65% in 2012, according to the report. That’s because more individuals are investing in stocks via mutual funds, in part through retirement plans.

Increasingly the big funds are flexing their muscles. Eighty companies held votes this spring on “proxy access” proposals, mostly under pressure from these institutional investors. The proposals seek to allow certain groups of shareholders to nominate their own candidates for board seats. Last year, only 10 companies held such votes.

Companies such as Citigroup Inc. embraced proxy access this year, but Wal-Mart Stores Inc.’s shareholders voted down a similar proposal.

Companies trying to avoid granting proxy access to shareholders may be suffering from the retail voters’ passivity. The Broadridge report found that 61% of votes cast by institutional investors were in favor of proxy access, compared with 15% of those cast by retail investors.

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