Tag Archives | proxy votes

Big Three Index Funds: Bebchuk, Hirst and More

Lucian Bebchuk has given more thought to the issues surrounding the Big Three Index Funds than other researchers. He and Scott Hirst recently provide a “comprehensive theoretical, empirical, and policy analysis of index fund stewardship.” Reference also Strine: Big 4 Responsible to “Forced Capitalists,” as well as The Untenable Case for Keeping Investors in the Dark by Bebchuk, et al. as we examine further strategies to make large investors work more effectively for those who use their services.  Continue Reading →

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SHE Index to Promote Gender Diversity

Index to Promote Gender DiversityIndex to Promote Gender Diversity: From the Press Release

Index to Promote Gender Diversity announced by State Street Global Advisors (SSGA), the asset management business of State Street Corporation (NYSE: STT). Check out the SPDR® SSGA Gender Diversity Index ETF (Ticker: SHE). SHE seeks to track the performance of the SSGA Gender Diversity Index, which comprises listed US large capitalization companies with the highest levels within their sectors of gender diversity on their boards of directors and in their senior leadership.

I view this as a very positive development but also see it as an opportunity to take action by requesting that SSGA also vote its proxies to promote gender diversity. Continue Reading →

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Increase Retail Shareholder Participation in Proxy Process

recommendedAs I have been mentioning, I will be on a panel at the 2/19 SEC Roundtable discussing how to increase retail shareholder participation in the proxy process. It is the night before the event; so I’m trying to boil it all down, knowing I’ll probably only get a few minutes to say anything. The previous posts are all well and good about things that should be done. I tried to focus on what the SEC could do to help, since they are holding the event. Now that our panel is about to convene, I’m just going to mention what could prompt participation, whether or not it requires anything from the SEC.

From the SEC notice: 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.  Continue Reading →

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How RIAs Can Take the Lead on Corporate Governance

Louis Brandeis

Louis Brandeis

In his 1914 collection of essays called Other People’s Money and How the Bankers Use It, Louis Brandeis argued that powerful men such as J.P. Morgan leveraged unbalanced control of the public’s assets to their own benefit. One hundred years later, not much has changed. If Brandeis were alive today, you can be sure that he would be advocating for new systems of financial accountability for those on top of the financial hierarchy. Continue Reading →

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Announcing Proxy Votes Improves Corporate Governance


Shareowners Upholding Industry

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 →

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Fiduciary Duty to Announce Votes (Part 3): Take Action


Take Action: Ask your mutual fund, pension fund, and/or endowment to:

  1. Send you a copy of their proxy voting policies and their proxy voting record.
  2. Report their votes in advance of annual shareholder meetings to ProxyDemocracy.org.  
  3. Make a small donation (not tax deductible) to ProxyDemocracy.org to keep that valuable service going or contact Andy Eggers to make a tax-deductible contribution through their 501(3) affiliate. I’ll match donations up to $2,000 until the end of June.

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Fiduciary Duty to Announce Votes (Part 2): Historical Background

A major landmark in establishing a fiduciary duty for proxy voting was the Department of Labor’s (DOL) 1988 Avon Letter, which was based on specific sections of ERISA (sections 402, 403, 404 and 405), summarized as follows:

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Fiduciary Duty to Announce Votes (Part 1): Editorial Calls For Advanced Disclosure

A recent editorial in Pensions & Investments (P&I), Winning over proxy voters, essentially argues that pensions have a fiduciary duty to announce their proxy votes in advance of the annual general meeting (AGM) if doing so is likely to influence the vote. This minor extension of current practice could have a profound impact and should also apply it to mutual funds and investment advisors, as well as other institutional investors, such as endowments.
The editorial discusses Warren Buffett’s recent reluctance to vote against the pay package at Coca-Cola.

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SEBI's New Disclosure Guidelines for Mutual Funds

InGovernimagesGuest post from Shriram Subramanian, founder of InGovern Research Services with the objective of facilitating shareholder activism by institutional investors and thereby enhancing corporate governance in India. Proxy Advisory Services, Corporate Governance Research, Risk Monitoring, and Proxy Services. India’s SEBI, through a circular dated March 24th, 2014, released a new set of disclosure guidelines to be followed by mutual funds. These guidelines will be applicable from April 1st, 2014. Some of the important guidelines are: Continue Reading →
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Using Sharegate: The Next Great Shareholder Communications Platform

sharegateOne way to use Sharegate is to announce your proxy votes. Far too many retail shareowners just trash their proxies instead of using them. A common misconception is that shareowners should take the Wall Street Walk and sell if they are displeased with any aspect of a company they own. That is like saying you should pack up and move out of the neighborhood if you think there should be a stop sign at the end of the block.  Continue Reading →

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Robert Monks: Obtaining Proxy Vote Information on 401(k) Plans Often Difficult

Robert Monks has just begun a series of articles at CSRwire on his most recent book, Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream (my review). Part one of the CSRwire is A Simple Solution to Runaway Corporate Power. See also, Robert A.G. Monks, Crusading Against Corporate Excess, NYTimes, July 6th. His main message is simple, “Corporations must have involved owners and ownership is both a right and a responsibility.” I took his advice on my own 401(k) plan and got an eye-opener.  Continue Reading →

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Ramblings on Votes, the Power of CorpGov.net, TCL and Jim Crow for Retail Shareowners

I see from Alcoa’s 8-K filing, that William Steiner’s proposal to end supermajority requirements won 68%. Last year, a similar proposal won 73% but this year management put their own proposals on the proxy, so some just voted for their proposals to end supermajority requirements in three areas. Management’s highest proposal won 736,143,769 votes, with 20,319,646 opposed and 4, 344, 531 abstentions. I understand that’s 74% of stock outstanding, so the measures still failed to meet the 80% supermajority threshold required for change.

With 74% favoring, and 2% opposing, it is yet another frustrating exercise in futility by shareowners. Since management placed proposals on the proxy, they look like they’re being cooperative. However, how much was real and how much was just for show? Did they make any real effort to solicit proxies to overturn supermajority requirements? My guess is that it was minimal, if any.

I see from the 8-K filing by Kellogg that my proposal to end supermajority requirements won about 46% of the vote, despite opposition from the Kellogg Foundation, which owns about 23% of shares. At least with the new filing requirements, we’re getting results a lot quicker.

At Bank of America, shareholders passed a resolution by John Chevedden that would give shareholders the right to call a special meeting as long as owners of at least 10% of shares vote in favor of it, down from the current 20-25% requirement (unclear in Fortune article). (Bank shareholders fight back — and win, Fortune, 4/29/10)

I reviewed Dawn Following Darkness: An Outcome-Oriented Model for Corporate Governance by Martin B. Robins on April 22 in Require Affirmative Proof in Specified Circumstances of “Too Big to Fail Companies” in Order to Meet the Business Judgment Rule. I may be going out on a limb but I think that publicity was all that was needed to push the paper onto the list of SSRN top downloads. Now, if we can only influence proxy voters as much as we influence SSRN readers, we’ll have a huge impact on corporate governance.

Ric Marshall and Cheri Gaudet, of The Corporate Library, put on a great webinar yesterday, “Director Elections 2010: A Shareowner’s Guide.” Ric was able to demonstrate their tools using some well know examples of outrageous disclosures. If you missed it, you may be able to catch the recorded version on-demand, assuming it is available to those who didn’t register.  It was especially interesting to see how TCL flags directors for various issues such as overboarding, lack of full independence, involvement in corporate failures, compensation and for several other reasons. Want to know which directors have lucrative compensation contracts with management? TCL has the tools to get you their in seconds. Check out Director Flags – Highlighting Shareholder Concerns. You can also request a free trial to Board Analyst to try out the Director Highlights feature.

John Chevedden brought to my attention what appears to be draconian bylaw provisions that call for a whole bunch of hoops to be jumped through for raising issues at shareowner meetings.  Some companies appear to be trying to discourage shareowner proposals by telling proponents that in order to file a rule 14a-8 proposal they have to jump through the same hoops as hedge funds. See item 4 in this example from H&R Block but note the language near the end  that says rights of Rule 14(a)-8 aren’t impacted. Comments on what this is all about?

And speaking of John Chevedden, he e-mailed me with yet another way retail shareowners get the shaft when voting through a voter information form (VIF) from Broadridge. I’ve written extensively on the “blank vote” issue and even filed a rulemaking petition with the SEC. Actual proxies must include a bold-face warning if blank votes will be turned into votes for management. However, VIFs typically include a practically microscopic footnote. Chevedden point out that after you cast your preliminary vote, it is easier to see how your blanks will be voted; and he provided this example from Mattel. Of course, if you do notice how your blanks have changed and you try to go back to fill in the blanks, you are punished because the system then requires you to vote all over again. The votes you want to remain valid have all disappeared. Gotcha! I revised my post, Jim Crow “Protections” for Retail Shareowners, to include this additional information.

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Mutual Funds Should Disclose Votes

On December 19, 2000 the AFL-CIO petitioned the Securities and Exchange Commission to require mutual funds to disclose how they are voting their shares. Currently, mutual funds aren’t required to disclose the principles they use when voting in corporate elections. Nor do they have to tell investors how they voted. Unlike pension funds, there isn’t even a requirement that mutual funds vote in the best interest of shareholders.

Recently, the UK began requiring that pension funds disclose their social investment policies (if they have such policies). Just as that law brought a new level of scrutiny to the investment decisions of UK pension funds, the reforms advocated by the AFL-CIO would allow individual investors in the US to ensure their shares are being voted consistent with their values.

As early as 1988 the Department of Labor set forth the opinion that, since proxy voting can add value, voting rights are subject to the same fiduciary standards as other plan assets. In my opinion, it’s about time that mutual funds and other institutional investors also accepted the responsibilities of ownership.

Most mutual funds don’t disclose their proxy voting policies or their votes. Perhaps they are reluctant to provide such disclosure for fear of being deselected by corporate 401(k) plans over particular votes. In addition, in many fund families the votes of the funds are probably not in harmony. Some funds will initially find such disclosures difficult, since they risk losing corporate clients. However, if it is a legal requirement, there will be a level playing field where advantage can best be gained by working in the shareholder’s best interest. Disclosure of mutual fund proxy voting policies and voting behavior should enhance the return on capital by increasing the accountability of corporate officers to corporate owners.

To make the information easy for investors to use, the AFL-CIO asked the SEC to require mutual funds to disclose both holdings and voting information on the Internet in a user-friendly format. A copy of the petition is available by calling (202) 637-3900. For information contact: Bill Patterson (202) 637-3900 or Lane Windham (202) 637-5018. I encourage all readers to add their voices to the AFL-CIO’s request. If fulfilled, it would be one of the most important developments in corporate governance ever.

For more information, read Mercer Bullard’s article “Make 2001 the Year You Become an Activist Fund Shareholder” in TheStreet.com, or go directly to his Fund Democracy website for sample letters to the SEC and additional resources. In a follow-up article, “Are Ballots Too Secret? Fund Advisers Should Tell How They Vote Proxies,” Bullard says the AFL-CIO’s proposal “holds out the best hope for improving corporate democracy in 2001.”

In my opinion, if adopted, mutual fund vote disclosure would rank in importance with the DOL mandate that pension funds treat voting as a plan asset and the SEC’s 1992 reforms which allow shareholders to communicate with each other without going through elaborate and expensive filing procedures.


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