As co-founder Mark Schlegel announced Tuesday, MoxyVote.com will be closing down its proxy voting platform at the end of the month. See also Ross Kerber’s report for Reuters at Shareholder website closing, cites complex voting rules, 7/11/2012 and Mark Latham’s Sad News: @MoxyVote Is Closing #Corpgov. On the surface, it seems like a real tragedy. I’m sure Mark, Doug Gates, Brian Sloyer, Jeff Marshall, Alison Slezak and others on staff made many sacrifices to keep their dream alive, as did Larry Eiben and others at TFS Capital, which sponsored Moxy Vote.
However, viewing the venture as a tragedy is like saying Neil Armstrong was a failure because he left the moon and came back to Earth. Just as the Blue Marble photograph of Earth helped us see our world in a new light, Moxy Vote helped us see corporations differently. This gang of explorers blazed a trail that will make it easier for others to follow. There’s a good chance we’ll see many of them back again, perhaps in different roles.
I had the pleasure of meeting Mark in early days and did what I could to plug him into those I know in the corporate governance industrial complex. Moxy Vote was well on its way but I’d like to think I at least helped them sign up a few “good causes” that broadened the functionality of their voting platform and may have given them a good idea or two. I know they certainly influenced me.
The avowed mission of Moxy Vote was to help retail investors influence companies and to give corporations better access to their investors:
Individuals can find their voice on Moxy Vote, and band together with others to influence companies to alter corporate policies on the issues that are important to them. For corporations, we offer a unique opportunity to have direct dialogue with their many different stakeholders, who are so vital to their long term success. As an independent site, we don’t take sides. We just want you to join the conversation.
They tried to avoid taking sides. However, it was clear that subscribers and users were driven by issues, as much as by profits. Witness just a few of the currently available sign-on letters:
- Thank Goldman Sachs for including female directors on its board
- Tell IBM to disclose political contributions
- Tell Fossil to evaluate its water use
- Tell Ameren to cut greenhouse gases
How they set up their site influenced who was attracted to it. ProxyDemocracy.org, another site offering proxy voting advice, gets far fewer hits. Founded by Andy Eggers well before Moxy Vote, ProxyDemocracy continues as a nonprofit. Eggers was inspired by the writings of Mark Latham. See Vote Your Stock and Proxy Voting Brand Competition, available on the publications page of VoterMedia.org.
Latham saw a fundamental problem in SOX and other regulatory efforts shifting power from one group of conflicted agents (boards and management) to others who may be equally conflicted (institutional investors, advisors, etc.). He wanted ultimate owners to take more responsibility but recognized they don’t often have the financial incentives or time to properly analyze the issues. He suggested methods by which retail shareowners would be able to vote along side of trusted “brands,” essentially institutional investors that did have the time and resources to analyze the issues and vote intelligently.
ProxyDemocracy was inspired directly by that model. If you want to know how “trusted” funds are voting, ProxyDemocracy will tell you and will even inform you when votes are collected. Their mission statement is simple:
ProxyDemocracy provides a set of tools to help investors use their voting power to produce positive changes in the companies they own.
Moxy Vote’s approach was slightly different. Their thinking was that more shareowners will be attracted to vote in corporate elections because they are drawn to specific issues, rather than because of a more abstract interest in good corporate governance or environmental stewardship, even as they apply to specific companies.
Those coming to Moxy Vote likely get there because they are interested in women’s rights, clean water, upending corporate domination of politics, slowing global warming, etc. They might be prompted to do so by PETA, the Humane Society or the Sierra Club. Once they get there and see the range of issues that corporations influence, shareowners might look over a wider range of advocates and begin to make their voices heard in these areas as well.
No matter how they arrive at the sites, both make it easier for retail shareowners to vote with some intelligence. Yet, fewer than 10% bother to vote at all.
From my perspective, I was often frustrated in Moxy Vote’s early days when I would find voting advice on one item on a corporate proxy but no advice about a dozen items, such as which directors to vote for. As institutional investors signed on, that problem largely vanished and Moxy Vote became something of a one-stop shop.
Using ProxyDemocracy, you go to the site and either copy information down or have that screen available while you are voting through ProxyVote.com, the standard platform offered by Broadridge where about 90% of retail shareowners go to vote per links sent by their broker. Moxy Vote let you vote right on the site where you got your advice.
Another great innovation by Moxy Vote was the ability to have your broker send the proxies to Moxy Vote and set up a tiered system of “if then” decisions, depending on how you ranked the “brands” reporting their votes. If x voted this item, follow their example. If not, vote with y. If y didn’t vote, vote like z, etc.
This is essentially how institutional investors vote most items, but instead of copying someone else’s vote they have voting programmed by their policies. For example, always vote in favor of a proposal to establish majority voting requirements for directors (most directors are elected by plurality, so if no one runs against them — the usual case — it only takes one vote to win). Of course, policies can be overridden and no investor is likely to have a policy on every issue that might arise, so institutional investors have staff that look at these exceptions and make decisions.
Over the years I’ve discussed the idea of setting up voting schemes for individuals based on policy documents that could be developed from extensive questionnaires with Latham, Eggers, Schlegel and others. However, nothing so far devised approached the simplicity and robustness of Latham’s concept of voting by brand.
Much has been written about our casino economy and the growing myopia of investors focused on the next quarter. Proxy voting by brand and proxy advisor competitions, discussed in Latham’s papers cited above, serve to lengthen that field of vision because brand reputation is built over the long term. To use just one of Latham’s examples, it is hard to assess the reputation of directors because there are so many of them, they have relatively short careers and serve at few firms. It is much easier to assess the reputation of a monitoring brand, since there are fewer of them, they often have long track records and they evaluate many firms.
An upcoming organization, Sharegate.com will likely take up at least some of the slack created by Moxy Vote. They have a different model and should be fully up and running by next proxy season. See Sharegate Launches in Beta: Social Media to Facilitate Shareowner Action. Let’s hope their business model works.
At least Sharegate won’t be offering a proxy voting platform. The more successful Moxy Vote was in attracting proxy voters, the more they had to pay Broadridge, which essentially has a government sanctioned monopoly on proxy voting platforms, especially when it comes to retail shareowners. (Disclosure: Broadridge is one of many firms in my portfolio but I have worked against their monopoly power to encourage a open form of client directed voting.) After pouring $4.5 million into the company, investors decided to shut down Moxy Vote on July 31, 2012. From Schlegel’s announcement:
It seems appropriate at this time to explain our rationale for closing. The simple answer is that we were unable to make any tangible progress on several key barriers to our success. These obstacles have been known for some time. In fact, we documented them very clearly nearly two years ago in our response to the Securities and Exchange Commission’s request for public comment on its publication entitled Concept Release on the U.S. Proxy System. For those that are interested, our comments can be read here.
In summary, our efforts thus far lead us to conclude that there are two primary obstacles that will prevent any individual investor-focused proxy voting websites from being successful. They are the following:
- Individual shareholders have no legal grounds to compel their brokers to deliver ballots electronically to internet voting platforms. And, unfortunately, many brokerage firms have stated clearly to us that they will send them only when required to do so by regulators.
- Proxy distribution/collection agents are presently charging significant fees to internet voting platforms for vote collection – a fee that should be paid by public companies and one that proves substantially more burdensome to individual voters than institutional voters.
Schlegel went on to highlight a few of Moxy Vote’s accomplishments:
- 197,000 subscribers to Moxy Vote’s content e-mails
- 56 leading advocate organizations posting voting advice on moxyvote.com
- 30,000,000 shares voted (intelligently!) using this advice through moxyvote.com
- 64 “Letters to Management” sent by Moxy Vote readers
- 275,000 signatures, in aggregate, on the Letters to Management
More than numbers, Moxy Vote began to change our vision of the corporation. They helped move at least some of us shareholders from disengaged gamblers to active participants in a community of owners. I was delighted to see that Schlegel ended his announcement with a commitment to continue to fight for needed reforms at the SEC and elsewhere so that future Moxy Vote’s can be financially viable. We are loosing a valuable internet site but look forward to continued collaboration.
Three cheers to the staff at Moxy Vote, pioneers one and all!