American values were recognized as at risk in 1932 when Adolf Berle and Gardiner Means argued that with dispersed shareholders, ownership has been separated from their control. (The Modern Corporation and Private Property) Ironically, concentration of equities under the umbrella of three or four indexed funds presents an opportunity to end that divide and make companies better reflect American values by being more accountable to their beneficial owners. Accomplishing that goal depends on transparent governance, such as proxy voting, and fostering real dialogue on the issues faced by corporations and investors. As I have argued, real-time disclosure of proxy votes could drive these huge funds to compete with each other based on not only profits and costs but their governance efforts, as reflected in proxy voting records. Continue Reading →
Tag Archives | MoxyVote
The November 15 SEC Roundtable on the Proxy Process will include me on the SEC Shareholder Proposal Panel. Public announcement with instructions for submitting comments. I will only have a few minutes at the Roundtable. What should I emphasize? Where should I stay in DC?
Take Action: Readers of CorpGov.net know far more than I do. Please email your suggestions and supporting evidence. Without your help, I will ramble off topic to connected tangents, difficult to explain in a few seconds. This post is sure to be an example. Continue Reading →
At the recent #AllInForImpact SRI Conference – on Sustainable, Responsible, Impact Investing I presented a “Topic Table.” These are informal gatherings of up to 10 people during lunch. Topics are submitted prior to the conference by any registrant who wishes to lead a discussion on an issue related to sustainable, responsible, impact investing. Mine was on Proxy Access and Advocacy.
I started out with a Calvin and Hobbes cartoon depicting how many people see business today… run by narcissists, producing little of real value and looking to be subsidized. Continue Reading →
In part 2 of a post on facilitating votes and activism by retail shareowners I continue to speculate on what could be done to improve the situation by recalling some of the better features of major efforts to date and possible improvements that would help conscientious shareowners. As Mark Latham reminded me after yesterday’s part 1,
We retail shareowners own all of the shares traded in the United States — 1/3 directly through buying shares and 2/3 indirectly through our investments in institutions like mutual and pension funds. Those two modes of ownership result in very different patterns of voting on director elections and other shareowner decisions…
That’s why Proxy Democracy et al are so important: They help us vote our directly owned stock better (in our interests), and they help us push intermediaries to vote our indirectly owned stock better (in our interests)…Somehow this reminds me of the saying “All politics is local.” In this case: “All stock ownership is retail.”
Retail shareowners own about 1/3 of shares traded in the United States but vote only about 1/3 of the shares we own. As Nell Minow once quipped, “you can lead a shareholder to a lot of dense material, but you can’t make them read it.” (Video Friday: SEC Proxy Voting Roundtable) Our voting influence is much smaller than it could be. If more retail shareowners not only voted but participated in discussions on corporate governance and in filing shareholder proposals, that might lead to greater accountability of managers and boards. Continue Reading →
Yesterday, I posted a recent letter to the editor of Pensions & Investments praising their editorial, Winning Over Proxy Voters, which argues that institutional investors have a fiduciary duty to announce their proxy votes in advance of annual meetings, if doing so is likely to influence voters. If institutional investors heed their call, it will speed the development of open client director voting (CDV) and more intelligent proxy votes.
As corporate power grows and the power of government falls, mechanisms to govern corporations become more important. As government power falls, their power to regulate corporations falls as well. Further, as the influence of corporations over governments increases (e.g. lobbying) the will of governments to regulate corporations also falls. – CHR for Social Responsibility
Historically, most retail shareowners toss their proxies. During the first year under the “notice and access” method for Internet delivery of proxy materials, less than 6% made use of their proxy votes. Those that do vote own disproportionately more shares (about 25-30% of total retail shares). The voting rate hasn’t improved much, if at all. This contrasts with almost all institutional investors voting, since they have a fiduciary duty to do so. Unfortunately, it isn’t time/cost efficient to read through the entire proxy to vote a few retail shares intelligently. Continue Reading →
Thanks to Broc Romanek I learned of what he termed the Wildest Idea of the Year? Creating a “Vote Buying” Framework, July 29, 2013. Here’s part of his take:
Two Professors from the U. of Chicago – Eric Posner and Glen Weyl – have used their economic backgrounds as a way to devise a solution to shareholders who are too lazy to vote or too ill-informed when they vote as noted in their study. So the essence of their idea is to force shareholders to buy votes so that only “interested” parties have a right to vote – owning shares would only provide a shareholder with a right to profits… Continue Reading →
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. Continue Reading →
Schlumberger (SLB) is one of the stocks in my portfolio. Their annual meeting is coming up on 4/11/2012 in Curacao, frequently referred to as “one of the Caribbean’s best-kept secrets,” and not easy to get to from Continue Reading →
Yes, corporate governance takes on more importance since the decision. Corporations could easily control our elections. ExxonMobil spent $45 million lobbying at the federal level during the 2007-2008 election cycle. Jamin Raskin, Professor of Constitutional Law at American University and a Maryland State Senator, says if they spent 10% of their 2008 profits, or $8.5 billion, on electing their own candidates “that would be three times more than the Obama campaign, the McCain campaign and every candidate for House and Senate in the country spent in 2008. That’s one corporation. So think about the Fortune 500.” (In Landmark Campaign Finance Ruling, Supreme Court Removes Limits on Corporate Campaign Spending, Democracy Now!, 1/22/10)
Who controls corporations? I would argue it is still mostly CEOs. Of course, they’re supposed to report to directors but, so far, the balance of power seems to remain with the corner office and the Business Roundtable. A lot has changed since the early 1990s when Sears allocated over $5.5 million to defeat one independent board candidate, Robert A. G. Monks. Most of the S&P 500 now have a majority vote standard for elections… although directors who don’t get a majority of the vote usually only have to offer their resignation to the board. The board doesn’t have to accept it and nothing stops them from replacing tweedle dee with tweedle dum.
More corporations are moving to split the roles of CEO and chair. Many, like Whole Foods, appear to be making the change, not because they believe in good governance but because they want to avoid unnecessary distraction. In his blog (12/29/09), Mr. Mackey writes, “Was I forced to give up the Chairman’s title? Absolutely not! Both the idea and the decision to give up the title were completely my own… At no time has anyone on the Board or in management ever asked me to give up the title.” (Whole Foods: Progress But Still a Lapdog Board, CorpGov.net, 12/30/10)
We finally won repeal of broker votes, which almost always went to management. However, there is still the issue of blank votes… when a shareowner votes at least one item on their proxy but leaves others blank, the blanks magically turn into votes for management. (see SEC petition, 5/15/09)
But, all in all, shareowners have gained relative power in the last few years. CEOs may still control corporations but through organizations such as the Council of Institutional Investors, the International Corporate Governance Network and businesses like the RiskMetrics Group and Glass Lewis, institutional shareowners have gained substantial clout. In a few years, ProxyDemocracy.org, MoxyVote.com, Shareowners.org, and the Investor Suffrage Movement might similarly empower retail shareowners and that is where I will probably put most of my efforts.
Since posting Corporate Governance: More Important than Ever with Supreme Court Decision yesterday, I’ve already gotten several inquiries concerning my statement that “We either need a law like in the UK so that companies must get permission from their shareowners in advance to make political contributions in excess of some amount or we need a massive number of shareowner resolutions at each company to accomplish the same.”
I understand Senator Charles Schumer is already considering a bill that would require shareowner approval of certain political contributions. I trust the Center for Political Accountability will expand their current focus from disclosure to shareowners to permission from shareowners if they can. Our friends at Calvert, Walden Asset Management, Domini, Trillium Asset Management and elsewhere are likely to take up the charge and I will be there lending whatever support I can.
For me, the most important immediate task will remain trying to level the playing field. Investors need to move from holding poker-chip like entitlements to being actual owners. Once investors begin to think like owners, instead of gamblers, they will demand accountability from their corporations. Since most shareowners invest in a market basket of companies, rather than single companies, we should all be able to agree that it is in our best interest if none of our companies makes political contributions.
One big start in getting investors to think like owners would be to repeal section 17A, subdivision e, of the Securities Exchange Act of 1934, which requires the Securities and Commission to immobilize securities certificates. As we point out in our draft petition to the SEC, a direct registration system will facilitate shareowner-shareowner communications, reducing the cost of proxy contests and making corporate elections more democratic.
Appropriate steps should be taken to ensure communications are presented in a manner that is intelligible to and convenient for average investors. For example, shareowners have long sought integrated proxy solicitations that combine materials from all parties in a contested election. DRS would facilitate this.
An increased volume of communications would go hand-in-hand with an increase in the number of contested elections or issues. As average investors realize they were being offered opportunities to make real decisions, retail shareowner participation in corporate elections will likely rise. To further enhance this trend, technology and policies can allow shareowners to customize their participation, opting out of some types of communication, and controlling the form of media and style of presentation of others, much as users customize some news websites to deliver only the types of news that interest them… an RSS feed for shareowners.
So, my answer for now is, “let’s get control of corporations.” Institutional investors are already required to vote in order to meet their fiduciary duty. Many are conflicted. Our best hope may be to get individual investors to think like owners. First step is to make them actual owners, instead of holding security entitlements. Take a look at that draft petition, my table on how street name registration results in rights denied, and give us some feedback. You can either do that through the comment function (yes, you have to register with the site first… I don’t want to clean out a lot of spam) or you can e-mail me.
Start using ProxyDemocracy.org for proxy research, MoxyVote.com for voting, join Shareowners.org and the Investor Suffrage Movement. Years down the road, let’s hope Citizens United is overturned. Even then, getting control over corporations, which have so much influence over us, will be vitally important.
Most affluent retirees want more than just investment management from their adviser, according to a survey released by Sallie Krawcheck’s wealth management group at Bank of America Corp. (Well-off retirees: We sought financial advice too late, Investment News, 1/14/10) According to Ms. Krawcheck, this is an opportunity for financial advisors, “what we’re learning is that our business is really becoming a business of solving problems with people.”
Financial advisors might also spend some time advising shareowners on where to find impartial information on how to vote. With voting down to 4% among retail shareowners only getting notice and access, they obviously need help. Advisors could point clients to sites like ProxyDemocracy and MoxyVote that disclose how institutional “brands” are voting or provide voting recommendations of “advisors.”
Financial advisors should also warn their clients that those who those who hold securities under “street name registration” only hold “security entitlements,” not real shares. SEC laws and regulations are written to protect shareholders, not those with security entitlements.
Therefore, Broadridge and others interpret requirements that apply to proxies as not applicable to their “voter information forms.” Counting blank votes for management, with only a microtype warning on the ProxyVote screen and summarizing resolutions so voters can’t even guess the subject are abuses that would end with a system of direct registration and the use of actual proxies.
Advisors could further gain the trust of their clients by educating them a little on their role as owners, instead of being completely focused on asset allocation, when to buy, and when to sell.
TheCorporateCouncil.net posted a transcript of a recent Webcast on the SEC’s new Proxy Disclosure requirement. Like always, they do an excellent job of sorting out issues for those getting into the weeds.
RMG reports “The wave of new federal securities lawsuits related to the global credit crisis has finally subsided, down 7-24% depending on whose data you use. The largest category of 2009 cases were those that arose from the credit crisis. (Investors File Fewer Lawsuits in 2009, 1/6/10)
theRacetotheBottom.org has covered a raft of issues lately that are worth a read. These include: Executive Compensation at Goldman Sachs, Executive Compensation, Delaware’s Top Five Worst Shareholder Decisions of 2009 and the need for reinstating Glass-Steagall.
Bowing to pressure from shareholders of On2 Technologies, 11.5% of whom voted they share through MoxyVote.com, Google raised its offer to $132 million, up from $106.5 million. (Shazam! Google raises its offer price for On2, 2/7/10)
Study finds Private Investments in Public Equity (PIPEs) announcement returns decrease almost linearly across the first six PIPE transactions, going from positive to negative. Firms that issue multiple PIPEs have high cash levels, and a majority make acquisitions. Successive PIPE transactions delay accessing of public markets while keeping institutional ownership low. Hence, they are greeted skeptically by the market as maintaining managerial entrenchment. (Are Private Placement Announcement Returns Really Positive? On the Information Content of Repeated PIPE Offerings, Ioannis V. Floros and Travis Sapp, SSRN, 1/7/2010)
Small ESOPs, those controlling less than 5% of outstanding shares, benefit both workers and shareholders, implying positive productivity gains. However, the effects of large ESOPs on worker compensation and shareholder value are more or less neutral, suggesting little productivity gains. These differential effects appear to be due to two non-value-creating motives specific to large ESOPS: (1) Management-worker alliances to thwart hostile takeover threats and (2) To substitute wages with ESOP shares by cash constrained firms. Worker compensation increases when firms under takeover threats adopt large ESOPs, but only if the firm operates in a non-competitive industry. (“Employee Capitalism or Corporate Socialism? Broad-Based Employee Stock Ownership”, Kim and Ouimet, SSRN, 12/1/09)
MoxyVote.com launched on November 20, 2009 in Beta and has already attracted considerable attention. Philly.com jumped right in with West Chester’s Moxy Vote boosts rebel shareholders on opening day. Cari Tuna did something a little more substantial with her Proxy-Voting Advocates Pool Resources on the Web (WSJ/11/23/09).
Of the systems utilizing the internet to increase retail investor participation in proxy voting by providing guidance on proxy issues from institutional investors, advocates or analysts, MoxyVote.com is the only one attempting to do so as a profit-making business, except perhaps FundVotes and CorpGov.net. The others – Investor Suffrage Movement, ProxyDemocracy.org, Shareowners.org, TransparentDemocracy.org, and VoterMedia.org – are all using some sort of non-profit form.
MoxyVote’s most direct competition at this point is ProxyDemocracy.org and TransparentDemocracy.org. All three systems provide users with information on how others are voting or advocate voting. ProxyDemocracy.org appears to be far ahead at this point with regard to actually being able to look up an individual company and finding recommendations, since they are collecting votes from some very huge funds like CalSTRS and Florida SBA, which own shares in thousands and thousands of companies.
Those reporting or advocating on MoxyVote and TransparentDemocracy.org tend to be smaller, like Calvert Investors or Investors Against Genocide. However, MoxyVote has the distinct advantage of being able to be tied in with your brokerage accounts and by allowing you to vote your shares right through the site. It is the only site that allows users to receive their proxies, obtain guidance from multiple sources and submit their votes all at one place.
Since proxy season isn’t in full swing, I don’t have any proxies to vote right now, so couldn’t test that function yet. However, when we do, another feature I like is that we will be able to see how many voters used MoxyVote to vote how many shares. That’s going to be a powerful tool in building involvement. Yes, you may only be voting 40 shares with the recommendations of Calvert or Change to Win but if you see on the site that 100, 1000, or 10000 others did the same, you begin to see that small votes do add up.
MoxyVote also employs a form of client directed voting (CDV) that allows users to set it and forget it. The CDV system advocated by the Business Roundtable has five choices: always vote for management, always vote against management, abstain, vote in proportion to shareowner vote within my broker, let my broker decide. These feel relatively meaningless to me. MoxyVote allows you to set your voting default to your list of advocates (your trusted “brands“). Right now, I’ve got mine ranked as follows:
- Investor Environmental Health Network
- Center for Political Accountability
- Change to Win
- Calvert Investments
- Boston Common Asset Management
Therefore, I could set up my account so that four days before the meeting, my stock is voted as recommended by IEHN. If IEHN has no recommendation by then, it is voted per the recommendation of CPA. If CPA has nothing, then it looks to CtW and on down the line until one of my advocates has a position. If none do, I can set the default position to vote with management, against them or abstain. If I elect to abstain, MoxyVote withholds my votes from director nominees.
For individual shareowners, MoxyVote provides access to various information sources, the convenience if automated voting and the ability to align your votes with those supporting like-minded organizations. For shareowner advocates, it appears to be a cost-effective way to get out their message and recruit new members with similar values. Once the site begins to attract a large following, corporate management may also see value in getting involved. They could use the site to communicate with owners and potential owners, as a listening post to get a sense of where their retail investors stand on various issues, and in helping them meet quorum requirements.