Individual investors are increasingly losing their voices (via proxy or directly) in crucial shareholder voting matters. The reason for this under-representation has nothing to do with anything as thrilling as deceptive business practices or secret votes. It is just that fewer individual shareholders are choosing to return their proxies.
This lack of return creates numerous dilemmas for companies that want to proceed with the voting process.
After all, for voting to take place it is necessary to reach a quorum, that is the number of shareholder and/or proxy votes that are needed to conduct business (typically a majority of the shareholders). If a quorum cannot be reached because of lack of votes, then many times the Ten-Day Rule may be utilized.
The Ten-Day Rule allows brokers to vote proxies for shareholders that have not turned in their votes ten days before a meeting at which voting will take place. This rule can only be applied to routine matters, which offers an ambiguity that is swiftly being 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 might be Election Contest Rules enacted that would require shareholders, not brokers to vote in questionable director elections or when there is a recommendation for an Election Contest as well.
Serious problems for businesses are triggered when individual proxies are not 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 do not always have the management's best 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 business.
Why the indifference to voting among individual investors?
Many could find the terminology of the ballots filled with industry terms and hard to understand. Some may think that others would do the job for them. The reasons for not sending in proxies are as distinctive as the individual shareholders themselves.
How you can Improve Proxy Returns
What may be done to motivate individual investors to vote on their behalf? Well thought-out communication and educational campaigns designed to call shareholders to action might help.
This matter is of course crucial to the future of companies mainly because when an individual investors votes aren't returned, their voices are lost and other individuals are heard in their location.
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