Individual investors are increasingly losing their voices (via proxy or in person) in crucial shareholder voting matters. The cause for this under-representation has absolutely nothing to do with anything as exciting as deceptive company practices or secret votes. It's just that fewer individual shareholders are choosing to return their proxies.
This lack of return creates lots of dilemmas for companies that wish to proceed with the voting process.
After all, for voting to happen it's necessary to reach a quorum, which is the number of shareholder and/or proxy votes that happen to be required to conduct business (typically a majority of the shareholders). If a quorum cannot be reached resulting from lack of votes, then many times the Ten-Day Rule can be utilized.
The Ten-Day Rule makes it possible for brokers to vote proxies for shareholders who have not turned in their votes 10 days prior to a meeting at which voting will take place. This rule can only be applied to routine matters, which presents an ambiguity that is quickly becoming defined and amended.
Non-routine issues from equity capital markets such as emerging capital from equity capital market plans has to be voted on by shareholders. Soon there may be Election Contest Rules enacted that would require shareholders, not brokers to vote in controversial director elections or when there's a recommendation for an Election Contest as well.
Serious problems for businesses are caused when individual proxies aren't returned and the Ten-Day Rule is not applicable. Individual investors and brokers both tend to vote on behalf of the company administration, but institutional investors don't always have the management's best interest in mind.
They do however always return their proxies. This could 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 wording of the ballots filled with business jargon and hard to understand. Several may believe that other individuals would do the job for them. The reasons for not sending in proxies are as unique as the individual shareholders themselves.
The way to Improve Proxy Returns
What can be done to encourage individual investors to vote on their behalf? Well thought-out correspondence and educational campaigns designed to call shareholders to action can help.
This matter is certainly crucial to the future of companies because when an individual investors votes are not returned, their voices are lost and others are heard in their location.
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