Investors urge SEC to shake-up US shareholder votes – Bruce Goldfarb in the Financial Times
Regulator to examine improvements to the arcane and costly proxy voting system
By Lindsay Fortado
Expensive, complex and prone to error — the voting system at US companies’ shareholder meetings would put Broward County, Florida, to shame. Following a debacle at Procter & Gamble last year, when it took two months to work out if activist investor Nelson Peltz had won a seat on the consumer giant’s board, investors, advisers and companies are urging the US Securities and Exchange Commission to drag shareholder democracy into the 21st century.
The proxy voting system, where shareholders elect board members and get a say on other contentious issues, is “complicated, somewhat arcane and . . . out of sync with modern technology,” said Bruce Goldfarb, chief executive of Okapi Partners, a proxy solicitor employed to drum up support during a contested vote. “The P&G situation put a spotlight on issues that have been plaguing the proxy process for years.”
Corporate governance groups said in submissions to the SEC that it must become easier for retail investors to vote, and regulators should address numerous impediments in the current system — including the costs — that are discouraging companies from reaching out to their shareholders directly. In the most recent proxy season, retail shareholders voted about 29 per cent of their shares, while institutional investors voted 91 per cent, said Darla Stuckey, chief executive of the Society for Corporate Governance.
[The complex process] makes an accurate and verifiable voting tabulation extremely difficult Brian Schorr, Trian Partners. During a proxy fight, a shareholder contesting an issue and the company spend millions trying to sway investors by mailing letters, courting the press for positive coverage and launching websites and advertising campaigns online and on social media in an attempt to reach shareholders. But in many instances, companies and their activist challengers do not even know who the shareholders are: many own stock through a brokerage and their names are kept private, making it hard to access them. And if an institutional shareholder such as a bank has lent out the shares for the purpose of short selling, then the shares are often not voted on.
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