Recommendations to Increase Retail Shareholder Participation

Getting Retail Shareholders to Participate in Proxy Process (Don’t call them VIFs)

I will be on a panel at the 2/19 SEC Roundtable discussing how to increase retail shareholder participation in the proxy process. Now is the time to boil my rambling posts down to recommendations to increase retail shareholder participation. The SEC agenda is in bold italics; my advice is not.

This panel will focus on strategies for increasing retail shareholder participation in the proxy process. The panel will discuss how technology – by providing better access to information or easier means of voting – might affect retail participation. In addition, the panel will discuss whether the format of disclosure could be improved to increase the engagement of shareholders and how the mechanics of voting could be improved to affect retail shareholder participation. 

Recommendations to increase retail shareholder participation

Based on my discussion in Part 1, Part 2, and Part 3.

• The SEC should move to direct registration and do away with all the complications involving DTC. Cede. etc. Simplify the system. Let us vote proxies, not voter information forms(VIFs). Moving from street name to direct registration as was planned when we temporarily immobilized shares in 1975. If we actually own shares, maybe we will start acting like shareowners instead of speculators of ‘security entitlements.’
• Shareholders need to know how our funds vote in a way that is easy to compare voting records (sortable database, not pdfs). N-PX filings should have votes, and reason codes (if available) XBRL tagged.
• Name the fund manager, so that we can compare within fund families. Require 401(k) and other plans to pass this information through.
• Move regulation of collective investment trusts (CITs) to the SEC? Maybe, if that is what it takes. CITs should be required to disclose and report their proxy votes to their investors in a useable format, facilitating the comparison of voting records.
• Require brokers to deliver VIFs/proxies to wherever the investor requests, such as open CDV systems.
• Open CDV systems should be paid by issuers for the cost of processing votes (it should still cost less than mailing). The SEC needs to address charges by Broadridge (per ballot processing fees discriminate against CDV systems that process small blocks of shares held by individuals, instead of batched, like brokers, or in large blocks like funds).
• Virtual-only ‘lockout’ meetings should be banned. The press should be allowed to attend all shareholder meetings.
• Shareholders presenting proposals should be able to do so electronically if the company holds hybrid meetings (or if virtual-only meetings continue).
• The SEC should make a finding that all shareholder votes involve ‘significant’ matters per section 957 of Dodd-Frank. Therefore, back-door broker voting should come to a stop. Votes left blank should stay blank.
• Rule 14a-4 mandates real requirements on proxies and confers real protections on shareholders. If we must continue with VIFs, and until we can convert to direct registration, the SEC should to confer the same requirements on VIFs and proxies. Shareholder proposals must be objectively labeled, whether on a proxy or a VIF. For draft underline and strikeout amendments, see my letter of October 20, 2010.
• Link ProxyDemocracy.org and other sits the compile announced votes to the SEC’s Investor.gov.
• The SEC should encourage the development of shareowner selected proxy advisors by amending rule 14a-8(i)8 to allow shareowner proposals that would allocate corporate funds to those who undertake to offer proxy voting advice, including advice on director nominees, that is made freely available to all of a company’s shareowners. (See no-action letter)
• The SEC should sponsor an ongoing competition on investor education, which would compete for a small amount of funding from the SEC allocated by retail investor vote on who provides the most useful information.
• All stock confirmations and monthly statements should include a reminder of assumed rights responsibilities, such as voting on directors, pay, shareholder proposals, etc.

I’m still looking for recommendations to increase retail shareholder participationhelp from my readers. Send me your recommendations or post them below as comments.