Robinhood’s New Proxy Platform Battles
Braham Oct. 22, 2021 10:26 am ET
Justin Sullivan/Getty Images
During the 1950s’ Red Scare, Sen. Joseph McCarthy’s followers tried to
ban Robin Hood in schoolbooks for being a “Communist” hero. The
student activists who protested this censorship were known
as Green Feathers.
The new Green Feathers may be budding investor activists at broker Robinhood
Markets (ticker: HOOD). With the acquisition
of Say Technologies in August, Robinhood has created an
online platform to allow individual investors, and potentially
activists, to engage with company executives directly in ways they
couldn’t before. It could also serve as a rallying point for
environmental, social, and governance shareholder proposals.
A Robinhood representative declined to comment about the acquisition,
but explained some of the Say platform’s technical features.
Previously, corporate engagement was almost exclusively the
domain of institutional investors such as New York’s and
California’s pension funds, which, for example, filed shareholder
resolutions to get companies to publish climate-risk reports. But such
engagement has been gradually moving downstream toward individual
investors and the financial advisors who represent them.
Robinhood’s Say platform allows individual shareholders to ask
companies questions during quarterly earnings calls with executives.
Investors write questions on Say and then collectively vote before the
meeting on which ones to ask. The questions with the most votes are
answered. At recent earnings calls, the questions asked were based on
tallies of the number of investors voting for them—not the number of
shares they control, as is standard on Wall Street. That puts
investors with as little as one share on the same footing with larger
At Tesla ’s (TSLA)
second-quarter earnings call in June, for instance, there were 607
Say questions, and the three most popular were answered by
CEO Elon Musk and other executives. The top question asked by
shareholder “Robert M.”—which received 2,700 Say votes representing
392,800 shares—was one a professional analyst might ask: “Can Tesla
share more details on the current status of the Cybertruck and confirm
if production is still expected in 2021?”
More interesting, though, was a less popular and thus unanswered
question from Zoe M., which received just 44 votes: “What do you plan
on doing in response to allegations of using child labor to mine
cobalt?” This question, raised before in the press about labor
problems in Congo cobalt
mines that Tesla relies on, isn’t the sort that a typical
Wall Street analyst would ask. Yet one can easily imagine the
Robinhood community also collaborating to ask once-unpopular
questions. The median age of its investors is 31—that is, millennials—some
95% of whom care about sustainable investing, according to a
Morgan Stanley survey.
Some prickly questions about
corporate governance made it through the Say vote transom at
Robinhood’s own second-quarter earnings call, including ones on
whether the company was doing anything to prevent stock-price
manipulation and on problems with regulators regarding Robinhood receiving
payment for order flow.
“This could become another avenue for investor influence,” says Jackie
Cook, Morningstar’s director of investment stewardship research.
“We’ve got proxy voting [on shareholder proposals]. But shareholder
meetings are so choreographed currently. Perhaps earnings calls could
evolve into a more meaningful interchange where uncomfortable
questions are asked.”
Combining such Q&A sessions with Say’s proxy-voting phone app, which
helps investors understand and vote on shareholder resolutions, could
prove powerful.. But overcoming investor apathy remains challenging.
According to one
Harvard University study, only 12% of the average brokerage
firm’s retail accounts vote; institutional investors almost always do
as part of their fiduciary duty.
One way to avoid this indifference, which often stems from ignorance
of proxy issues, is for investors to instruct their financial advisors
how to vote for them. Unlike Robinhood’s Say, other new engagement
platforms such as YourStake and OpenInvest, which was recently
acquired by JPMorgan
Chase (JPM), work through advisors.
“What people are looking for right now is just understanding what’s
going on in their portfolios,” says YourStake’s co-founder Gabe
Rissman. YourStake provides customized portfolio impact reports for
advisors that explain all of their clients’ various exposures—such as
fossil fuels, gender diversity, human-rights violations, and air
pollution. It also shows the various shareholder resolutions at
“When people have the data, that’s when they want to either change
their portfolios or dive into shareholder engagement, or both,”
Such information can help investors with advisor-run direct-indexed
portfolios. These private accounts often hold hundreds of stocks with
thousands of proxy issues to vote on every year. Because of this proxy
deluge, “a lot of times direct indexing actually leads to less
voting,” Rissman says. Both YourStake and OpenInvest are working on
solutions that integrate investors’ ESG goals with proxy voting for
direct-indexed accounts. YourStake has joined with
direct-indexing firm First Affirmative Financial Network to
offer a product that can automate ESG voting for accounts.
ETFs Often Vote “No” On ESG Proxies
The three largest ETF managers typically do not support proposals that
would increase corporate responsibility.
2015 - 2020 ESG Shareholder Proposal Support
2015 - 2020 Climate Shareholder Proposal Support
Total Assets (tril)
Source: As You Sow, BlackRock, StateStreet, Vanguard
The fund world presents even greater challenges for shareholder
engagement: Fund managers, not individual investors, decide their
proxy votes. BlackRock
(BLK) , the largest exchange-traded fund manager,
recently said that it would allow
its largest institutional clients customized control over
their proxy votes. But offering that to ETF shareholders would be
difficult: There are millions of them worldwide with brokerage
accounts largely anonymous to BlackRock.
Funds S&P 500 Equal Weight No Load Shares (INDEX)
wants to address this roadblock. It started polling its investors last
December as to how it should vote on proxies. In the first quarter of
about 100 shareholders responded.
The corporate sheriffs of Nottingham needn’t worry just yet.
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