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Shareholders Losing Power - Communicate Your Considerations
Individual investors are gradually losing their voices (via proxy or in person) in crucial shareholder voting matters. The cause for this under-representation has nothing to do with anything as exciting as deceptive business practices or secret votes. It's just that fewer individual shareholders are choosing to return their proxies.
This lack of return creates a lot of dilemmas for firms that wish to proceed with the voting process.
After all, for voting to occur it is necessary to reach a quorum, which is the number of shareholder and/or proxy votes that are required to conduct business (typically a majority of the shareholders). If a quorum cannot be reached on account of lack of votes, then many instances the Ten-Day Rule can be utilized.
The Ten-Day Rule permits brokers to vote proxies for shareholders who have not turned in their votes ten days prior to a meeting at which voting will take place. This rule can only be applied to routine matters, which delivers an ambiguity that may be quickly becoming defined and amended.
Non-routine issues from equity capital markets such as emerging capital from equity capital market plans must 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.
Really 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 management, 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 within 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 industry jargon and hard to understand. Several might believe that other people would do the job for them. The reasons for not sending in proxies are as unique as the individual shareholders themselves.
How to Improve Proxy Returns
What can be done to encourage individual investors to vote on their behalf? Well thought-out correspondence and educational campaigns intended to call shareholders to action can help.
This matter is obviously crucial to the future of companies because when an individual investors votes aren't returned, their voices are lost and others are heard in their place.
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