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Shareholders Losing Their Power - Communicate Your Issues
Individual investors are increasingly losing their voices (via proxy or in person) in crucial shareholder voting matters. The cause for this under-representation has nothing to do with anything as thrilling as deceptive business practices or secret votes. It's just that fewer individual shareholders are deciding to return their proxies.
This lack of return produces numerous dilemmas for businesses that wish to proceed with the voting process.
After all, for voting to happen it is necessary to reach a quorum, that is the number of shareholder and/or proxy votes that are required to conduct business (normally a majority of the shareholders). If a quorum can't be reached because of lack of votes, then many occasions the Ten-Day Rule can be utilized.
The Ten-Day Rule makes it possible for brokers to vote proxies for shareholders that have not turned in their votes ten days prior to a meeting at which voting is going to take place. This rule may only be applied to routine matters, which provides an ambiguity that's quickly becoming defined and amended.
Non-routine issues from equity capital markets which include emerging capital from equity capital market plans must be voted on by shareholders. Soon there may be Election Contest Rules enacted that would demand shareholders, not brokers to vote in questionable director elections or when there is a recommendation for an Election Contest as well.
Significant problems for businesses are caused when individual proxies aren't returned and the Ten-Day Rule is not applicable. Individual investors and brokers both have a tendency to vote on behalf of the company management, but institutional investors don't often have the management's interest in mind.
They do however always return their proxies. This can give them over-representation in the voting processes and unfair control of the companies.
Why the indifference to voting amongst individual investors?
Many could find the terminology of the ballots filled with industry jargon and difficult to fully grasp. Some may believe that other individuals would do the job for them. The reasons for not sending in proxies are as distinctive as the individual shareholders themselves.
The best way to Improve Proxy Returns
What can be carried out to motivate individual investors to vote on their behalf? Well thought-out communication and educational campaigns created to call shareholders to action can help.
This matter is certainly crucial to the future of companies mainly because when an individual investors votes aren't returned, their voices are lost and others are heard in their location.
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