Individual investors are gradually losing their voices (via proxy or directly) in crucial shareholder voting matters. The reason for this under-representation has nothing at all to do with anything as thrilling as deceptive company practices or secret votes. It's just that fewer individual shareholders are choosing to return their proxies.
This lack of return produces several dilemmas for businesses that want to proceed with the voting process.
After all, for voting to take place it really is necessary to reach a quorum, that 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 can't be reached as a result of lack of votes, then many occasions the Ten-Day Rule may be utilized.
The Ten-Day Rule allows brokers to vote proxies for investors that have not turned in their votes 10 days prior to a meeting at which voting will take place. This rule may only be applied to routine matters, which delivers an ambiguity that's swiftly being defined and amended.
Non-routine difficulties from equity capital markets including 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 debatable director elections or when there's a recommendation for an Election Contest as well.
Significant problems for businesses are triggered when individual proxies are not returned and the Ten-Day Rule isn't applicable. Individual investors and brokers both have a tendency to vote on behalf of the company administration, but institutional investors don't always have the management's interest in mind.
They do however always return their proxies. This could give them over-representation within the voting processes and unfair control of the business.
Why the indifference to voting among individual investors?
Many might find the terminology of the ballots filled with business jargon and hard to fully grasp. Several might think that others would do the job for them. The factors for not sending in proxies are as distinctive as the individual shareholders themselves.
The way to Improve Proxy Returns
What can be done to inspire individual investors to vote on their behalf? Well thought-out correspondence and educational campaigns developed to call shareholders to action might help.
This matter is of course crucial to the future of businesses simply because when an individual investors votes are not returned, their voices are lost and others are heard in their location.
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