The title of this post is a question I hear when I talk about proxy voting and corporate governance to individuals not “in the game” so to speak. Among those in the field of corporate governance and shareholder activism, the answers come rapid fire: “Good corporate governance improves shareholder value,” “Executive compensation is out of control and needs to be reeled in,” ” Voting is a fiduciary duty.” and so on. But when the question is posed to individual investors, there is silence, at best. More likely, I hear comments like, “I throw mine away,” or “It doesn’t matter. If I really don’t like what a company is doing, I sell my shares and move on.” While these comments are anathema to the views of those of us involved in the field of corporate governance, the rest of the investing world couldn’t care less.
It strikes me that the problem lies, in part, with the way many investors view voting and investing in general: They are in it for the money. Okay, some investors have a conscience, want to make sure that their companies “do the right thing” and so on, but at the end of the day, most investors just want a return on their investment. Herein lies the problem: There is a real disconnect between investing and proxy voting. To my knowledge, nobody has made a compelling case to individual investors to vote their proxies as part of the investment process.
This problem is demonstrated in the numbers. Voting by individual shareholders, always a low figure (in the low double digits, I believe) has plummeted in recent years as more companies deliver proxy materials to their shareholders via the Web. I recently heard a number bandied about suggesting that individual voter turnout at American corporations hovers around 5%.
Am I wrong here? Can anybody make the case for why proxy voting provides value for individual investors? The tired, “corporate governance is good” arguments are fine but they don’t motivate shareholders to act. What’s in it for Joe Hubcap to open the blue plastic package and read and understand a torpid proxy statement then make a decision about the issues when dinner is getting cold and American Idol is about to start?Why Should I Vote My Proxies?W
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{ 2 comments… read them below or add one }
James McRitchie 12.09.09 at 1:51 pm
Why do you vote in civic elections? Because your voting impacts you. Sure, you can toss your proxy, like the vast majority of retail shareowners… but if you do, you are relying on a lot of institutional investors who may have conflicts of interests. Is a mutual fund trying to sell its 401(k) services going to vote against entrenched managers?
Why toss your proxy when you can vote it in seconds on MoxyVote.com after setting up a list of trusted advisors and copying their behavior? It only takes another few seconds to check sites like ProxyDemocracy.org or TransparentDemocracy.org for voting advice and then voting through Broadridge’s electronic platform.
If you approach shareholding like a Los Vegas slot machine, there is little point in voting because you’ll probably only hold the stock for a few days. However, if you are a long-term shareowner, you’ll want your company to be governed well so the value of your share increases. The time it takes to be relatively well informed is now minimal. No excuses.
John Richardson 12.10.09 at 10:41 pm
I agree with you about the process. The problem lies in the fact that most people I have talked to don’t see the reasons why they should take the time to check off the boxes on a proxy ballot. I have made a point of asking people about what they do with their proxies and the answer is always the same. This needs to change of course and while new tools like MoxyVote (www.moxyvote.com) and Proxy Democracy (www.proxydemocracy.org) will help, the key in my mind is to figure out the self-interest, not just altruism, that motivates ordinary investors.
How do we communicate the idea that proxy voting and investment returns are linked? There are certainly studies that bear this out but investors not in the business of corporate governance don’t get it.
Any thoughts here?