Retail Shareholder Voting Behavior Sparks Discussion for Change

Individual investors, or commonly known as retail investors, want the playing field to be leveled with institutional investors when it comes to the proxy voting system, a voting system they feel is antiquated and has long favored institutions. An article by the New York Times highlights the individual investor’s perspective with comments from individual investors who say they often feel left out or ignored. Individual investors also expressed that they are just as interested in the makeup of boards, executive pay and governance matters as institutions. In an analysis conducted by Broadridge and PwC, they found a drastic difference in the voting behavior between individual investors and institutional investors. Individual investors feel this is a result of an unfair advantage in the proxy voting system platform currently available, often leaving them without proper guidance and resources to make an informed vote on matters that are just as important to them. Even the SEC agreed when it addressed the issue back in 2015. Individual investors want their voice to be heard and feel that corporations are not hearing from them the way they should, stating that voting is “too hard.” Here’s an interesting example, the article highlights that at 32 companies that failed say on pay in 2017, 66 percent of individual investors’ shares were voted in support compared with 32 percent of institutions’ shares. Individual investors argue that for them, this is a result of a proxy voting system that is “onerous, frustrating, and broken,” thus the lack of voting engagement. Read more from this insightful New York Times article which sheds light on this issue.

Also, see SEC Chair Clayton’s remarks made on November 8, 2017, where he states that he “…has become increasingly concerned that the voices of long-term retail investors may be underrepresented or selectively represented in corporate governance.”

Read it here.

Sidenote: This issue makes me think about the retail outreach and participation in the The Procter & Gamble and Nelson Peltz proxy fight.