Tag Archives | ProxyDemocracy.org

Wal-Mart (WMT): How I Voted

Wal-Mart Stores (WMT) is one of the stocks in my portfolio. Their annual meeting is coming up June 2. ProxyDemocracy.org had four funds voting when I looked yesterday.

Checking the Summary Compensation Table, it appears CEO Michael T. Duke was paid more than $17 million.  Using the United States Proxy Exchange (USPX) released draft guidelines, I voted against most pay packages where the company paid more than the median $9 million last year, including this one. I also voted against compensation committee members Wolf, Reinemund, and Daft.

I voted for a pay advisory every year and in favor of most of the shareowner proposals, including:

  • Amend EEO Policy to Prohibit Discrimination based on Gender Identity
  • Report on Political Contributions
  • Reduce Requirements to Call Special Meetings
  • Prepare Sustainability Report

I think Wal-Mart, of late, has been doing a good job relative to climate change. Therefore, I voted against the proposal seeking a business report on that subject.
See also, Wal-Mart Is Being Pressed to Disclose How Global Suppliers Treat Workers, NYTimes, 5/30/2011.

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Google: How I Voted

Google (GOOG) is one of the stocks in my portfolio.  Their annual meeting is coming up June 2. ProxyDemocracy.org had several funds voting. Although I reviewed how they voted, my votes didn’t align with any of the funds.

Checking the Summary Compensation Table, it appears two senior vice presidents (Patrick Pichette and Nikesh Arora) each got more than $22.5 million last year. That’s too much, even for Google, when the median large cap CEO is getting a little more than $9 million. Using the United States Proxy Exchange (USPX) released draft guidelines, I voted against the pay package, against the stock plan and against L. John Doerr and Paul S. Otellini, since they served on the compensation committee. Management wanted a say-when-on-pay frequency of three years but I voted for every year.

Turning to shareowner proposals, I voted in favor of John Harrington’s bylaw to establish a Sustainability Committee. Although Google is doing more than many companies, I think soliciting public input and issuing periodic reports to shareholders and the public, as requested in the proposal, would put Google farther ahead in this important area. I also voted in favor of John Chevedden’s proposal that each shareowner voting requirement impacting our company, that calls for a greater than simple majority vote, be changed to a majority of the votes cast for and against the proposal in compliance with applicable laws. I submitted similar proposals at other companies and see this as good governance to avoid entrenchment.

I voted against the proposal by the National Center for Public Policy Research to report on possible conflicts of interest. Although the proposal sounds good, I think this is the same group that has encouraged companies to account for lobbying costs to support cap and trade programs, so I don’t trust them.

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Bogle Spinning in His Grave: Vanguard, a "Pay Enabler"

No, he isn’t dead but he might as well be as far as his ability to influence Vanguard, the giant mutual fund he founded. John Bogle wants funds to introduce resolutions at companies requiring a 75% shareowner vote in order to make political contributions. Yet, Vanguard has never introduced a single shareowner resolution anywhere that I know of. Bogle believes funds should vote in the interest of their shareowners, not their managers. We see no evidence of that at Vanguard. Corporations, he says, shouldn’t be controlled by their agents. Yet, Continue Reading →

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IRobot: How I Voted

IRobot (IRBT) is one of the stocks in my portfolio. Their annual meeting is coming up May 24. ProxyDemocracy.org had only one fund voting, CBIS, when I voted yesterday. MoxyVote.com had none. Today is the last day to vote using MoxyVote.com.

Checking the Summary Compensation Table, it appears CEO/Chair Colin M. Angle was paid more than $2.3 million, which is more than the $2.2 million median for a small-cap firm.  Using the United States Proxy Exchange (USPX) released draft guidelines and adjusting for company size, I voted against the pay package. However, because the difference was relatively small, I didn’t vote against the compensation committee. Management wanted a say-when-on-pay frequency of three years but I voted for every year. I voted using the MoxyVote.com platform.

NUM. PROPOSAL TEXT McRitchie
1.1 Elect Director Gail Deegan For
1.2 Elect Director Andrea Giesser For
1.3 Elect Director Jacques S. Gansler, Ph.D. For
2 Approve Executive Incentive Bonus Plan For
3 Ratify Auditors For
4 Advisory Vote to Ratify Named Executive Officers’ Compensation Against
5 Advisory Vote on Say on Pay Frequency One Year

 

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Rovi: How I Voted

Rovi (ROVI) is one of the stocks in my portfolio. Their annual meeting is coming up May 24. ProxyDemocracy.org had only one fund voting, Calvert, when I looked two days ago. MoxyVote.com had four “good causes” but only one readily identifiable source, Calvert.

Checking the Summary Compensation Table, it appears CEO/Alfred J. Amoroso was paid almost $7 million. That’s too much for what is essentially a small cap where median pay is $4.3 million. Using the United States Proxy Exchange (USPX) released draft guidelines and adjusting for company size, I voted against the pay package, against the stock plan and against Ludwick, Quindlen and O’Shaughnessy, since they served on the compensation committee. Management wanted a say-when-on-pay frequency of three years but I voted for every year. I voted using the MoxyVote.com platform.

NUM. PROPOSAL TEXT McRitchie
1.1 Elect Director Alfred J. Amoroso For
1.2 Elect Director Alan L. Earhart For
1.3 Elect Director Andrew K. Ludwick Withhold
1.4 Elect Director James E. Meyer For
1.5 Elect Director James P. O’Shaughnessy Withhold
1.6 Elect Director Ruthann Quindlen Withhold
2 Amend Omnibus Stock Plan Against
3 Ratify Auditors For
4 Advisory Vote to Ratify Named Executive Officers’ Compensation Against
5 Advisory Vote on Say on Pay Frequency One Year

 

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Interface: How I Voted

Interface, Inc (IFSIA) is one of the stocks in my portfolio. Their annual meeting is coming up May 23. ProxyDemocracy.org had only one fund voting, CBIS, when I looked yesterday. Often they seem to vote against just about every management recommendation but not this time. MoxyVote.com had five opinions but only two readily identifiable sources, Calvert and Trillium. They were at odds with each other.

Checking the Summary Compensation Table, it appears CEO/Daniel T. Hendrix was paid Continue Reading →

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Waste Connections: How I Voted

Waste Connection (WCN) is one of the stocks in my portfolio. Their annual meeting is coming up May 20.

ProxyDemocracy.org had only one fund voting, CBIS, when I looked yesterday. MoxyVote.com had none. Checking the Summary Compensation Table, it appears CEO/Chair Ronald J. Mittelstaedt was paid less than the $4.3 median for mid-cap stocks, using the United States Proxy Exchange (USPX) released draft guidelines and adjusting for company size. I’m happy with the relatively steady performance of the company, so I’m voting with management, except that I am voting for an annual say-on-pay.

NUM. PROPOSAL TEXT McRitchie CBIS
1 Elect Director Robert H. Davis For Against
2 Increase Authorized Common Stock For For
3 Ratify Auditors For Against
4 Advisory Vote to Ratify Named Executive Officers’ Compensation For For
5 Advisory Vote on Say on Pay Frequency One Year One Year

 

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Juniper Networks: How I Voted

Juniper Networks (JNPR) is one of the stocks in my portfolio. Their annual meeting is coming up May 18. May 14 is the last day to vote my proxy on the MoxyVote.com platform.

ProxyDemocracy.org had only one fund voting, CBIS, when I looked yesterday. MoxyVote.com had no recommendations.  The Summary Compensation Table shows CEO/Chair Kevin R. Johnson earned $10 last year. That’s more than the median pay of CEOs in the S&P 500. I’m voting against all pay packages above the median, including this one and I’m voting against the bonus plan. See Nay on Pay: How Continue Reading →

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Nutrisystem: How I Voted

Nutrisystem, Inc. (NTRI) is one of the stocks in my portfolio. Their annual meeting is coming up May 12. Today is the last day to vote my proxy on the MoxyVote.com platform.
ProxyDemocracy.org had one fund voting when I looked yesterday (CBIS). MoxyVote.com had no recommendations.  I see on the Summary Compensation Table that CEO/Chairman Joseph M. Redling was paid $5 million this year, $3.5 million last year, and $7 million the year before. Soon it starts to add up to real money. That’s too high for a company of this size. As I’ve discussed before (Just How Clever Are Directors on Pay Issue?), high executive pay is problematic to both the corporation and society for many reasons. I’ve decided, at least for now, the best way to counter the “Lake Wobegone Continue Reading →

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Ford: How I Voted

Ford (FDMTP) is one of the stocks in my portfolio. Their annual meeting is coming up May 12. Today is the last day to vote my proxy on the MoxyVote.com platform.

ProxyDemocracy.org had one fund voting when I looked yesterday (CBIS). MoxyVote.com had seven recommendations, but none for the whole ballot.  While I’m happy with Ford’s performance, I see that CEO/Chairman Alan Mulally was paid $26.5 million this year, $18 million last year, $17 million Continue Reading →

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Goldman Sachs: How I Voted

Goldman Sachs is one of the stocks in my portfolio. Their annual meeting is coming up May 6. Today is the last day to vote my proxy on the MoxyVote.com platform.

ProxyDemocracy.org had only two funds voting when I looked yesterday, CalPERS and CBIS.

MoxyVote.com had sixteen recommendations, although several were from voting consolidations for categories. There is no side-by-side comparisons, so users must scroll Continue Reading →

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MSCI: How I Voted

MSCI INC. (MSCI) is one of the stocks in my portfolio. Their annual meeting is coming up May 5. Today is the last day to vote my proxy on the MoxyVote.com platform.

ProxyDemocracy.org had no funds voting when I looked yesterday. MoxyVote.com had several recommendations.  All voted with management, except the General Board of Pension and Health Benefits of The United Methodist Church, which voted against director Linda H. Riefler. I voted entirely with management.

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Union Pacific: How I Voted

Union Pacific is one of the stocks in my portfolio. Their annual meeting is coming up May 5. Today is the last day to vote my proxy on the MoxyVote.com platform.

ProxyDemocracy.org had only one fund voting when I looked yesterday, CBIS.

MoxyVote.com had seven recommendations, although three were from voting consolidations for categories. I Voted in favor of John Chevedden’s proposal for an independent chair. I will always vote in favor of such resolutions, except, perhaps, in very unusual situations.

I voted against the executive compensation package based on the $15M pay package for Continue Reading →

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Hess: How I Voted

Hess is one of the stocks in my portfolio. Their annual meeting is coming up May 4. Today is the last day to vote on the  MoxyVote.com platform.

ProxyDemocracy.org had two funds voting, covering all the issues. MoxyVote.com has four advisors or compilations of advisors offering opinions. I voted on the MoxyVote.com platform and went with “SRI Pros Cause,” which “consists of professional investment organizations that practice socially responsible investing (SRI).” I am happy to see them voting Continue Reading →

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EMC: How I Voted

EMC is one of the stocks in my portfolio. Their annual meeting is coming up May 4. Today is the last day to vote on the  MoxyVote.com platform.

ProxyDemocracy.org had three funds voting, covering all the issues. MoxyVote.com has eight advisors or compilations of advisors offering opinions. This time, several are comprehensive. I voted on the MoxyVote.com platform and went mostly with management and Florida SBA. However, I did vote Continue Reading →

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Berkshire Hathaway: How I Voted

Berkshire Hathaway is one of the stocks in my portfolio. Their annual meeting is coming up April 30 Again, I’m a little disappointed not to see more voting advice available at this late date. Where are Florida SBA, CalSTRS, CalPERS, and all those SRI funds? Only AFSCME is reporting so far on ProxyDemocracy.org but they provide comprehensive advice on each item. MoxyVote.com has seven advisors offering opinions but none cover all the items on the proxy. That’s frustrating.

AFSCME has done more to advance the cause of proxy access, the Magnata Carta for Continue Reading →

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How I Voted at BP & Why I Vote on MoxyVote

BP, one of the stocks in my portfolio of about 50 companies, has an Apr 14, 2011 Annual Meeting coming up. I pulled up the “proxy statement” but didn’t have much patience with it… couldn’t easily find pay package, etc… perhaps because not US company. I checked in with ProxyDemocracy.org and MoxyVote.com… last day to vote using MoxyVote!

At ProxyDemocracy I see that Trillium voted against management on just about everything. I’m not quite that rebellious. I went with Florida SBA and CBIS, taking the harder line against management whenever they differed.

MoxyVote had recommendations from three groups but it is a little more difficult to compare them on that site since you have to click on each to get their recommendations, unless they are on your list of good causes. It looks like “Diversity” is asking people to vote against the only Continue Reading →

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CEOs Should Get Out Vote Among Employees Says Daly

In remarks before the National Press Club, the CEO of Broadridge, the nation’s largest shareholder communications company, called on all CEOs to encourage individual shareholders, including employee shareholders, to vote their proxies.

In 2010, just one in 20 individual retail investors voiced their opinions about the  companies they invested in by exercising their fundamental shareholder right. That compares to recent historical levels four to five times as high. Public companies need to understand the seriousness of this issue and act to reverse this troubling decline to get each of their individual investors — and all individual investors generally — engaged with their companies.

Richard J. Daly went on to explain that as an initial step in an overall strategy to increase individual shareholder voting, he is calling on CEOs of American businesses to

join with us in launching a nationwide effort to encourage their employees  — numbering in the tens of millions  — to exercise a fundamental shareholder right  — and need  — to vote their proxy ballots, whether  it be proxies relating to their employer or proxies relating to other companies in which they invest

As part of the effort, he is contacting the chief executives of America’s top 1,000 public companies to encourage them to motivate their employee shareholders to vote their shares.  Broadridge will inform shareholders —- within the constraints of regulatory boundaries —- that they have the ability to take action online, eliminate the paper, have all information stored in any format they want, have access to it anywhere they want and vote at any time they want, even on such new devices as Android™ phones and the iPad®.

A relatively small increase in voting participation by employees could meaningfully increase individual investor voting participation from 5% per year to 20% or more per year. Companies that can distinguish their investors’ opinions from others’ will more easily have the strength and confidence to stay on course and create value. There is no greater show of support than the ballot, or in this case, the proxy.

While I certainly agree with Daly that steps need to be taken to ensure more retail shareowners vote, I didn’t like the thrust of his remarks, which appeared to assume that more retail votes would mean more votes for management… or am I reading too much in when he says:

Better to hear from actual owners — whose interests are likely aligned with the company — than from outsiders whose agendas may be in conflict with shareholders’ long-term interests.

Additionally, it would have been nice if he would have emphasized the usefulness of sites that help inform shareowners on the issues.

If it is a public relations move that Daly is after, he might recommend that companies take a page from Prudential Financial. They’re rewarding their voting shareowners with totebags or by planting a tree. Last year, the company got an additional 68,000 shareowners to vote, mailed 120,000 bags and planted more than 112,000 trees.

This year, Prudential added information in its proxy materials on sustainability, corporate citizenship and shareowner engagement. Shareowners who cast their proxies online can view the directors’ bios and the supporting statements for shareowner proposals. More importantly, Prudential’s board supported a shareowner proposal from John Chevedden to eliminate the company’s supermajority voting provision.

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MoxyVote.com Adds Advocates

Right in the middle of proxy season, we are thrilled to welcome a few new Advocates on the site.  Here’s the rookie lineup straight from MoxyVote’s blog:

  • Bill Davis is an independent shareholder activist who works to address corporate governance issues and increase shareholder involvement. Davis was recently nominated for a lifetime achievement award by the Social Investment Organization for his shareholder engagement and advocacy efforts. Be sure to read his resolution at Canadian Imperial Bank of Commerce (CM).
  • NorthStar Asset Management, a Boston based SRI asset management firm, files and supports shareholder resolutions focused on corporate governance practices, corporate environmental policies, and diversity and anti-discrimination efforts within the workplace. Be sure to check out their human rights resolution at Ecolab (ECL).
  • The Center for Social Philanthropy (C-SocPhil) provides innovative research, resources, and tools to encourage long-term social and environmental philanthropic impact. They’re supporting shareholder resolutions to encourage individuals and larger organizations to vote for initiatives that support their socially responsible outlook.
  • FreedomWorks is headquartered in Washington, DC and works with hundreds of thousands of grassroots volunteers nationwide. Through their volunteer activist network, FreedomWorks engages in activities that promote individual liberty through decreased government involvement and corporate initiative. Be sure to check out their opinions for resolutions on the Duke (DUK), General Electric (GE), and Pfizer (PFE) ballots.
  • PAX World Investments has several mutual funds geared toward SRI and ESG investing. Through their proxy voting and advocacy efforts, PAX World supports shareholder initiatives focused on corporate social responsibility and sustainability efforts. Keep an eye out for future ballots with PAX World’s vote recommendations.

Florida SBA has also been added to the mix at MoxyVote and that’s critically important because they are the 4th largest public pension fund in the United States and they own a little bit of thousands of companies. Now, when you turn to MoxyVote for voting advice they won’t just have one advocate’s position on one issue on your ballot. You’ll also get voting advice on directors and corporate sponsored measures at most of the companies you might own.

I’m glad to see the growing lineup. Please keep in mind, if you don’t find the advice you need on MoxyVote, you can always go to ProxyDemocracy.org to find more advice from institutional investors. Then you can come back and vote with Moxy.

 

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How I Voted at Schlumberger

Schlumberger, one of the stocks in my portfolio of about 50 companies, has an Apr 06, 2011 Annual Meeting coming up. I’ve decided to vote early this time, since I’m in New Orleans and may be too busy to research much while there. I checked in with MoxyVote.com, ProxyDemocracy and OTPP.

MoxyVote had no recommendations as of 3/29, as I post this, but I expect they will soon. OTPP voted against the proposal to increase authorized common share capital. I voted with them on that issue. At ProxyDemocracy I see that Trillium voted against all directors. Maybe they’re doing it because Schlumberger is second only to Halliburton in providing fracturing services to natural gas companies? I don’t know.

Florida SBA voted against Tony Isaac and K. Vaman Kamath. AFSCME voted against Chairman and CEO Andrew Gould. I went with these recommendations. Maybe it is just me but $9 million in options awarded to Gould last year on top of the rest of his pay for a total of about $15 million just seems over the top.

For say when on pay, I went with annual, along with disclosed votes by CBIS, Florida, Trillium and AFSCME. When I checked on 3/27 ProxyDemocracy was showing that CalPERS voted with management for a frequency of every two years. However, after contacting CalPERS I learned they actually voted for annual voting on SWOP. Both parties looked into the glitch and as of 3/28 it was fixed.

I also voted against the officers compensation proposal. As I said before, $15 million for Gould seems over the top to me. I’m not sure where the cut-off point is for reasonable pay but as long as shareowners approve such packages the averages will keep ratcheting up and the disparity between the top 1% and the rest of us will continue to grow. We need to ratchet down the Lake Wobegon effect.

For all other proxy items, I voted with management using the MoxyVote platform.

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Starbucks: How I Voted

I waited until almost the last minute hoping to get proxy advice from my usual sources, ProxyDemocracy.org and MoxyVote.com. However, little has been forthcoming… nothing from Proxy Democracy as I write this.

Based on Moxy Vote information and recommendations from As You Sow, I went ahead and voted against two directors: Howard Schultz and Javier G. Teruel. I voted along with the As You Sow recommendation at Moxy Vote in favor of the shareowner proposal to Adopt Comprehensive Recycling Strategy for Beverage Containers. Starbuck’s is doing more than many companies in this area but I want to stress the importance of going even further, both for the environment and to project the right image for companies in which I want to continue to be a long-term shareowner.

I was able to find how Florida SBA voted, so went with them and voted against amending the omnibus stock plan. I understand their advance votes will soon be recorded at MoxyVote, which may finally make that platform a one-stop-shop, since it will give them the depth and breadth of the 4th largest public pension fund.

All of my other votes were with management.

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Don’t Toss that Proxy

During the next several months, most corporations will be sending out their proxies (ballots) and holding their annual meetings. Individual shareholders own about 30% of the stock in US markets but few bother to participate, even though we often feel corporate managers have too much power and too little accountability.

When we fail to vote, we essentially turn our assets over to management.  Most of us feel we should vote but we also think voting is too complicated and time consuming. Since we only hold a few shares, we often think that failing to vote won’t have any consequences.

Recent changes allowing corporations to e-mail and post proxy materials on the internet have dramatically reduced the proportion of shareholders voting to as little as 5%. (Apparently, it is easier to ignore a stack of e-mails on your computer than a stack of paper on the dining room table.) However, the internet also makes it much easier to vote in corporate elections and to vote intelligently.

There are literally thousands of sites for investors (here’s a few), ranging from brokers to associations to scam artists. Mostly, they focus on

  • stock picking,
  • allocating your investments, and
  • when to sell.

While these are important issues, what’s new are sites on how to be an owner. Voting is how we hold corporate directors and managers accountable.  Obviously, shareholders haven’t done a great job, especially at the banks. Voting is the cornerstone of good corporate governance. All the rules of Washington can’t save us from future Enrons and stock bubbles if shareholders don’t start acting like shareowners instead of gamblers.

Some say shareowners should leave everything to trusted financial advisors. What, like Bernie Madoff? Or we could just trust in the management of the companies we invest in… but their interests are often different from ours. We may not approve of the $6,000 shower curtain at Tyco or the unprotected derivative bets at AIG.

Institutional investors own about 2/3 of the market. Should we just leave voting up to them? After all, they have a fiduciary duty to vote and they have the resources to investigate the issues. Unfortunately, many also have potential conflicts of interests. For example, mutual funds don’t want to vote against corporate managers who may decide who will run the company’s 401(k) plan. That’s potential business a mutual fund doesn’t want to lose.

Additionally, the average turnover of stock, mostly by institutional investors, is huge. For NYSE listings it was 130% in 2008 and 250% in 2009, meaning the average stock was bought and sold 2 ½ times in 2009. Owning Intel 30 times in 10 years isn’t really being what I’d call a long-term owner. Most of us hold our stocks longer.

We’re usually in for the long term but since we generally only hold a small portion of the stock in any one company, we lack the economic incentive to buy expert advice or spend the time ourselves analyzing complicated proxy issues like shareowner proposals, board elections, executive compensation, mergers etc.

Until recently, being an actively involved shareowner was impractical for most of us but just like social media sites like Facebook are bringing people together, several new internet sites are making proxy advice obtainable for free. Here are five sites worth exploring:

1. Corpgov.net is my blog. For over 15 years I’ve discussed major trends and have provided links to dozens of activist or aggregator sites so that investors can join forces or research what other shareowners are doing.

2. ProxyDemocracy.org aggregates, displays and automatically e-mails to subscribers proxy votes announced in advance by respected activist funds like CalPERS, CalSTRS, Calvert, CBIS, Domini, Florida SBA, AFSCME, Trillium and others. Using ProxyDemocracy.org, you can copy the voting behavior of these trusted “brands.” The site also rates funds on how they vote on issues involving: director elections, executive compensation, corporate governance and corporate impact. So, if you know what issues concern you, you can use that information to help you decide whose votes to copy and which mutual funds to buy.

Another feature of ProxyDemocracy.org is that they will tell you when they have collected votes for upcoming proxies on the stocks in your portfolio (if you give them your e-mail address and name the stocks). Because of the breath and depth of the activists funds it follows, you’ll almost always be able to see how at least some funds are voting.  Unfortunately, you can’t vote your shares directly on ProxyDemocracy.

3. Moxyvote.com has dozens of “advisors,” mostly socially responsible mutual funds, unions, environmental groups and public interests groups who take a stand on various proxy issues. At Moxy Vote you can actually get voting advice and vote on the same site, using the pin number you get from your broker. Easier yet, you can also have your broker deliver your proxies directly to Moxy Vote.

If you choose that route, you can even set up voting defaults based on the recommendations of your chosen advocates. That way if you don’t vote your proxy or override your defaults, the system will automatically vote with your advocates. For example, mine are set up to look first to the Investor Environmental Health Network, if they haven’t taken a position on the proxy item, my vote will be cast per the Center for Political Accountability. If they don’t have a position it moves to my third choice and on down the line. Unfortunately, many of the advisors on Moxy Vote are focused narrowly and hold few stocks. They won’t give you advice on every stock you hold or on every issue at the companies where advocates have taken positions.

4. Shareowners.org is an advocacy site aimed at getting shareownrs to lobby Congress on various issues. Advice on voting at specific companies is limited but like Facebook, it is a great place to share announcements and commentaries with others.

5. The United States Proxy Exchange (proxyexchange.org or USPX), like Shareowners.org, is an advocacy site. However, USPX not only involves members in lobbying efforts, it also involves them in analyzing developing policies. Want to learn how to file resolutions? Present resolutions at local companies? Put your expert skills to good use? USPX provides training and multiple points of entry to baby-boomers and young people alike who would like to see their ideals put into action.

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Voting by Phone in Corporate Elections

Maybe the app will be renamed iVote.

Companies who want to encourage shareholders to vote on corporate resolutions publicized in proxy statements can do so next year, by allowing them to cast votes on their iPads, iPhones, Blackberries, Android or other smart handheld devices.

Broadridge Financial Solutions said that it will make its ProxyVote.com software available early next year on mobile data devices such as smartphones and tablets.

The software is already available for use on personal computers. The move to mobile devices is “to improve and encourage more shareholder voting and enhanced shareholder communications,” said Joseph Vicari, Vice President, Business Strategy and Development, Broadridge.  via Voting by Phone, in Corporate Elections.  Thanks to Gary Lutin for heads up on this article.

Attention: Anyone out there building the iVote app, please build in automatic interfaces with ProxyDemocracy.org and MoxyVote.com. Great to enable voting by phone but even better to enable intelligent voting. Shareowners need information on the people and the issues before they vote.

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How I Voted at Hain, Cisco & Accuray

I waited too long to vote on the MoxyVote.com platform. However, even waiting until the day before the meeting, I was still only able to get minimal advice. I hearty thanks goes out to CalSTRS and their cooperation with ProxyDemocracy.org. At least they had announced votes for Hain and Accuray as I cast my votes this morning.

At Hain, I voted down the line with CalSTRS, withholding votes from director nominees Berke, Futterman and Meltzer, as well as voting against the long-term stock plan proposed by management. At Accuray, I would have voted with CalSTRS and management. However, the ProxyVote platform wouldn’t accept the control number provided to me by my broker. With all the proxy plumbing issues mentioned in the SEC’s concept release, I guess I shouldn’t be too surprised with this glitch. I contacted my broker. We’ll see how quickly they can resolve this.

Since not even CalPERS had announced votes at Cisco, I was on my own. I voted abstain on all the director nominees and other measures except that I voted in favor of the shareowner resolution on environmental sustainability reporting and steps to reduce possible human rights violations. Just as an experiment, I left one field blank to see if Broadridge had addressed the blank vote issue. They had not. After voting, a second page comes up asking to confirm my vote. At the top of that page, in very small print obscured by the gray background the following note appeared.  “*No vote entered.  Your vote will be cast as recommended by the soliciting committee.” And there was a small asterisk next to the vote I left blank.

Obviously, there is much work to be done to improve proxy voting. Here in voting three stocks, I was only able to obtain voting advice on two. On one of the stocks I ran into a proxy plumbing issue. I also confirmed that blank votes are still being turned over to management with only the most obscure warning. For more about that issue, see Don’t Let Companies Change Shareholders’ Blank Votes, HLS Forum on Corporate Governance and Financial Regulation.

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How I Voted at ACAS + How ProxyVote and MoxyVote Handle Blank Votes

Before voting American Capital Ltd. (ACAS) I checked at ProxyDemocracy.org and saw how CalSTRS is voting. I voted with them against Harper, Lundine, Peterson, Puryer, stock option plan and against the issuance of convertible securities. CalPERS did not post how they are voting. I found no “advocates” at MoxyVote.com. Although I would be happier knowing how others are voting or why CalSTRS is voting the way they are, I still trust their judgment with respect to how to vote than I do the soliciting committee at ACAS.

I also checked to see if the blank vote problem with respect to director elections had been modified at Broadridge’s ProxyVote. It hasn’t. Dodd-Frank requires the rules of the exchange to “prohibit any member that is not the beneficial owner of a security… to vote the security in connection with a shareholder vote…(with respect to the election of directors)… unless the beneficial owner of the security has instructed the member to vote the proxy…”  I don’t know if this lapse is because this provision of Dodd-Frank only takes effect when the Exchange changes its rules and they are approved by the SEC or what. (see Open eMail to NYSE Re Blank Votes)

When using Broadridge’s ProxyVote system, if I vote but fail to indicate how I’m voting on a director (or any other issue), the next screen shows that I’m voting for the director with a little asterisk next to my new vote and a note elsewhere on the screen indicating votes left blank are voted per the “soliciting committee.”

Voting on MoxyVote.com is slightly different, even though my understanding is that Broadridge still process the votes. At MoxyVote.com my ballot was pre-marked, all in favor of management. (I presume if one of my selected “advocates” recommended how to vote on the proxy that would override the default.).  At least on the MoxyVote.com system you can clearly see how your vote will be recorded on both the first and second screens and that there will be no blank votes, since if you don’t change the vote, it will be voted for management (per the soliciting committee).

I wonder if MoxyVote.com could legally set the default at Abstain, even though SEC Rule 14a-4(b)(1) says that “a proxy may confer discretionary authority with respect to matters as to which a choice is not specified by the beneficial owner or security holder”? It seems to me that  MoxyVote.com could consider that a “choice” specified by the beneficial owner, since they are warned and must check a box before finally approving their correctness of their vote before it is recorded.

Before going live with this post, I contacted MoxyVote.com and learned what I had forgotten when I set my preferences. Actually, their system does allow users to set defaults to vote with or against management or to abstain. I went back in and set mine to “abstain.”

How to: Login and go to “preferences.” At your preferences  page, look down the left hand side at the bottom under your priority cue – it says “Prioritize and manage” in a big red button – hit that button.  Then at the bottom of that page you will see a drop down menu; select always vote with, against or abstain. You get to choose.

While I wouldn’t want to set these limited preferences and forget them, I like this option much better than what Broadridge offers on ProxyVote.  At MoxyVote.com is is harder to space out because on the first screen I see everything filled out.  If I do space out, my “blank” votes no longer go to management, since I set my default to abstain.

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An Open Proposal for Client Directed Voting

According to the SEC, “client directed voting” will be included in a forthcoming concept release on “proxy plumbing” issues and SEC Chairman Mary L. Schapiro now indicates review by the Commission is forthcoming (see this post on the Forum). It is critical that shareowners become familiar with this term. The SEC can shape their concept release to facilitate entrenchment, by essentially reestablishing a limited form of broker voting, or their framework can further the interests of shareowners and the larger society through an open and competitive system.

Background

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% voted. This contrasts with almost all institutional investors voting, since they have a fiduciary duty to do so. “Client directed voting” (CDV), a term coined by Stephen Norman, is seen by many as a solution for getting more retail shareowners to vote, ensuring companies get a quorum, and helping management recapture a good portion of the broker-votes cast in their favor that evaporated with recent reforms. An open form of CDV, could result in similar impacts but would also create much more thoughtful and robust corporate elections.

Retail investors are the principals in the principal-agent system of corporate governance. We are the beneficial owners of all equities – in the U.S., 25 to 30 percent via direct purchases, and 70 to 75 percent via our “ownership” of shares in mutual funds, pension funds and other intermediaries. The agents in our corporate governance system include CEOs, boards of directors, institutional investors, proxy advisory firms, compensation consultants, etc. An “Open Proposal” on CDV will improve the accountability of all these agents to the principals by empowering retail investors with better information and voting tools.

Since Stephen Norman coined the phrase in 2006, the concept of CDV is generally attributed to him and his work with NYSE’s Proxy Working Group. Looking back at the origins of the concept, on October 24, 2006, the NYSE filed a proposed rule change with the SEC to eliminate all broker voting in the election of directors. Two months later in December 2006, Steve Norman presented a proposal called Client Directed Voting to an investor communications conference.

The case for CDV was again made on the Harvard Law School Forum on Corporate Governance and Financial Regulation by Frank G. Zarb, Jr. and John Endean (available here). Similar to Norman, the voting options presented were severely restricted to the following: (1) in proportion to other retail shareholders; (2) in a manner consistent with the board’s recommendation; or (3) in a manner that is contrary to the board’s recommendation.

John Wilcox’s post several weeks later, Fixing the Problems with Client Directed Voting, helped to expand and popularize the concept beyond Norman’s initial concept with a much more open proposal.

Shareowners and the SEC would be well served to review the work of Mark Latham, a member or the SEC’s Investor Advisory Committee, who proposed something similar to CDV at least as far back as the year 2000. See The Internet Will Drive Corporate Monitoring and other papers on the VoterMedia.org Publications page). In stark contrast to Norman, Latham’s proposed system is open and competitive, using a market-driven framework. This post builds on his work, especially Latham’s recent post, Client Directed Voting Q&A, also found on the VoterMedia.org site.

How Open CDV Would Work

Open CDV enables retail shareowners to implement a specialization strategy similar to that of institutional investors. Most fund managers do not read the proxy statement and understand the proposals in the context of a company’s particular circumstances. They have specialized staff for that review, some in-house, some out-sourced. Likewise a few retail shareowners will read proxies, but most will not. Those who do not read them can increasingly be informed by those who do and by voting announcements posted on the Internet.

With an Open Proposal, anyone can create a voting feed, just as anyone can now create a blog. One way to create a feed is to remix other feeds, just as blogs often post or link to material from other blogs. A remixed feed can select different source feeds for different stocks or different industries or different categories of voting matters (director elections vs. shareowner proposals etc.). In his article The Internet Will Drive Corporate Monitoring, Latham called remixed feeds “meta-advisors.”

Engagement requires either a fiduciary obligation, which we won’t have for retail shareowners, the perception of value in the process (which may take years to establish) or passion around relevant issues. Of the three, passion around relevant issues will be the easiest to ignite.

Many third-party platforms or voting feeds will be designed around “issues,” rather than harder to understand policies and procedures. That will naturally appeal to a broader base of retail shareowners. More people will choose voting advice around policy concerns, like global climate change, than around procedural concerns, like whether or not the roles of board chair and CEO should be split.

A small but important percentage of retail shareowners will get more involved in helping to determine voting feed reputations. They will compare feed quality and issue/value identification by such means as creating focus lists at ProxyDemocracy.org. See, for example, this page.

Most retail investors will only pay attention to the best-known voting feeds. A small minority of institutional and retail investors, along with writers in the financial media, are likely to become the most influential opinion leaders helping to determine public reputations, and thus which of potentially hundreds of voting feeds deserve to be followed.

Investors should be able to choose voting feeds and instruct our brokers to implement them for our shares. That is powerful because it takes little time, yet can implement intelligent voting based on reputation – just as the reputations of carmakers and computer makers are widely available and influence our purchases.

There is already a healthy base of “brands” developing with Domini, Calvert, Florida SBA, CalSTRS, CalPERS and others announcing a growing number of their votes in advance of annual meetings. In addition, there are plenty of other sources of voting advice besides institutional investors, many of which focus on a limited number of issues and many can already be seen at MoxyVote.com.

Moxy Vote has already built an open CDV platform on a relatively low budget. Proxy Democracy and Transparent Democracy can be readily enhanced to include voting capability if the SEC adopts additional data standardization and if cost reimbursement is forthcoming from issuers. See comments submitted by MoxyVote.com to the SEC here.

Essential Elements of Open CDV

The key issue in any open CDV system is to let shareowners control where their electronic ballots are delivered. Just as there is no question shareowners can control where hardcopy ballots are delivered, there should be no question they can direct where their electronic ballots are delivered. This simple requirement would insure third-party content providers an opportunity to compete and improve the quality of voting advice.

Additional elements for a more effective CDV system include:

  • A wide range of voting opinion sources that will eventually cover all issues;
  • Open access for any new opinion sources to publish their opinions;
  • Open access for shareowners to choose any opinion source for our standing instructions on voting;
  • Sufficient funding for professional voting opinion sources that compete for funding allocated by retail shareowner vote (or by beneficial owners of funds that may choose to “pass through” their votes).

Under an Open Proposal, feeds will offer the ability for retail shareowners to essentially build a “voting policy,” just as institutional voters are now able to do. That model will increase participation and voting quality. We shouldn’t ask shareowners to affirm every single pre-filled ballot. That could be a deal breaker for people with stock in many different companies who would rather spend their time on other activities.

Third-party CDV systems, like Moxy Vote, will allow investors to create hierarchies of voting instructions. (Vote like X. If X hasn’t voted the item, vote per Y. If Y hasn’t voted, vote per Z, etc. Eventually, these systems could become very complex. Vote like X on issue A; vote like Y on issue B, also specifying defaults if either X or Y don’t have votes recorded.)

If brokers are required to deliver proxies as directed by their clients, another whole model could emerge around “proxy assignments.” Proxies assigned to organizations or individuals, for example, could give annual meetings a new meaning. See Investor Suffrage Movement by Glyn A. Holton.

In the 1940s and 1950s thousands of shareowners frequently showed up for shareowner meetings because they frequently deliberated issues and some of those in attendance held substantial proxies from others. Lewis Gilbert, for example, was often given unsolicited proxies, which he used to negotiate motions at meetings.

Impact of Open CDV

We are a long way removed from those days and advance notice requirements would preclude much of the activities Gilbert made famous. Voting at meetings is important, but having a say in setting the agenda on what will be voted on is even more powerful. If a significant number of proxies are assigned to others or thousands of shareowners routinely follow specific voting advisors or institutions, leading voices can actually begin to influence how agendas for annual meetings are set.

An Open Proposal will increase both the quantity and the quality of voting by both retail and institutional investors. Ease of voting and the ability to align with valued brands will drive quantity. Increased quality will result from competition between voting opinion sources for reputation in the eyes of investors. Opinion sources will include institutional investors, retail investors, bloggers, activists and professional proxy voting advisors funded by new mechanisms discussed later in this article.

An Open Proposal will cause retail shareowners to engage in proxy voting because it offers several new and powerful ways for us to do so, while respecting our other interests and time constraints.

Additionally, institutional investors will begin to discuss their votes with each other more frequently, as well as with beneficial owners and funds. This is already happening. I have personally initiated such dialogues with several funds and have increasingly been met with a favorable response. As funds learn how and why other funds are voting, many are open to reexamining their own position.

Director elections in particular will be more closely watched, once shareowners gain a sense of empowerment. Prior to nascent CDV sites, we had little or no basis for voting against or withholding votes from individual directors. Soon we will be able to drill down through recommendations to discover which directors are over-boarded, miss meetings, have potential conflicts of interest, were on compensation committees that overpaid executives, etc. Funds will increasingly provide the reason for their votes, since that will drive more investors to vote with them. When a fund discloses not only their vote, but also the reason for their vote, investors get a better picture of their values and we begin to trust given “brands” as consistent with our own values.

Restrictions

Limiting CDV to only selected situations, like uncontested elections, would only lessen the benefits of CDV, so I don’t recommend imposing any such limits. It would be better not to establish any CDV through regulations that severely limits voting options, since once such systems are enacted they will be difficult to amend, given that those who benefit from such limitations will be in an even stronger position to fight opening up the process.

All matters should be eligible for inclusion in a CDV arrangement. All can be handled the same way, with the retail shareowner voting as per standing instructions to use specified voting feeds. Preferably, systems should allow users the ability to override standing instructions in any given situation. Competition among voting feeds will encourage those who create them to constantly improve their voting quality and reputation. One improvement is to adapt their analysis and voting decisions to the significant variation among proposals on any given matter. Another is to create industry specific analysis. Analysis could also vary by a company’s maturation and/or a great many other factors. Deeper levels of analysis are more likely with open CDV systems that enhance competition.

System Defaults

The default choice should either be whatever the shareowner selects or it should be a “not voted” vote, just like if a voter fails to mark an item on the proxy, that item should be left blank, although it is now often counted in favor of management. (See my petition to the SEC for a rulemaking on “blank votes” here)

Counting a blank vote as anything else would make mounting campaigns to deny companies a quorum much more difficult. Neither brokers nor anyone else should be permitted to vote on any ballot item in the absence of voter instructions (i.e., all items should be considered non-routine matters in NYSE rules).

Brokers/banks should not be forced to take on CDV design responsibilities. Other third-party specialist firms will probably do a better job. The key is to ensure that brokers or their agents deliver ballots to whomever the shareowner directs. Of course, it would also be a plus if brokers and banks would make their clients aware of the available options.

Competition for Funds Would Enhance CDV

I would recommend an ongoing competition open to providers of investor education, which would compete for funding allocated by retail investor vote. This could be limited to education about voting issues (informing CDV, providing voting opinions, organizing voting opinion data feeds, discussing reputations etc.), or voting could be included in a broader retail investor education competition. For more explanation, see Mark Latham’s Voter Funded Investor Education Proposal (November 30, 2009).

This would benefit all retail investors. Since the benefit is shared broadly, it should not be paid by individual retail investors, but rather through funds that we own collectively – corporate funds. There are several possible ways of arranging this. One example is Mark Latham’s Ultimate Proxy Advisor Proposal (June 1, 2010).

Under that proposal, companies pay voting advisors selected by their shareowners. Since there are no “free riders” and the advice is essentially paid for by all shareowners, we can pay much more for proxy research on our companies than current proxy advisors typically allocate. Additionally, the advice we get is less likely to be of a “box ticking” nature, more likely to be industry and company specific.

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.

In the near term, the entrenched agents in our corporate governance system may try to prevent investors from using our funds to empower ourselves this way, so enabling regulations from the SEC and public funds may be helpful to get started. Public funds earmarked for retail investor education and advocacy could be used for the first such initiatives.

Cost

Cost categories for CDV include: (a) creating voting opinion feeds; (b) system development for brokers; (c) vote processing by Broadridge and similar service providers.

If the SEC publicly encourages the development of CDV, many organizations are likely to build the necessary systems. As previously mentioned, voting opinion websites have already started appearing (ProxyDemocracy.org, TransparentDemocracy.org, MoxyVote.com). To enhance their quality, public funds earmarked for retail investor education and advocacy could be allocated by investor vote among such competing providers of tools for CDV.

CDV will increase the quality of voting and decrease the quantity and costs of paper mailings. These benefits will outweigh the costs of building CDV systems. Standardized data tagging will likewise streamline the system and reduce costs in the long run, although it will require some up-front investment.

NYSE rules currently require payment by issuers for the cost of voting electronically but issuers may not always be making such payments to CDV platforms like Moxy Vote. See NYSE Rules 450-460 pertaining to proxy distribution, available here. The Rules are actually written for “member organizations” (i.e., brokers) and specify what brokers or their agents (e.g., Broadridge) can charge for distribution and collection of proxy-related items. The rules are clear that Issuers are supposed to pay for all of the distribution (and collection) costs and that brokers can expect to collect from them. These rules should be amended to apply to Issuers when shareowners choose to take delivery of proxies or to vote through sites like Moxy Vote, RiskMetrics, Glass Lewis and ProxyGovernance.

The fees that Broadridge is charging to electronic voting platforms (RiskMetrics, Glass Lewis, ProxyGovernance, Moxy Vote, etc.) should be paid by the issuers as part of the overall collection costs (like postage). The electronic platforms, in this function, are merely an extension of the proxy distribution agent. However, I understand that Broadridge charges on the order of 10X for electronic vote collection from these platforms than it is permitted to charge the issuers.

If Broadridge is offering a “value-added” service to these electronic platforms, where is the “baseline” service that costs less? Perhaps the value-added services revolve around the ability to turn blank vote into votes for management without following the rules that apply to proxies. (See my blog post, Jim Crow “Protections” for Retail Shareowners)

My understanding is that fees are charged to electronic platforms on a “per ballot” basis (generally one fee per position per year) and that electronic platforms are generally passing along these costs to voters. That becomes much more difficult, perhaps impossible, when trying to service retail shareowners with small position sizes and many more per ballot transactions, relative to shares voted.

This is, in effect, becomes a system where the voter is paying to vote, like the old Jim Crow poll tax. It also inhibits progress (i.e., the development of electronic platforms for retail shareowners) because voting through the mail and through the phone is free. Why should retail shareowners have to pay when voting online, which is inherently the least expensive method of voting? Why should services like Moxy Vote have to front such expenses? Without a change, it is hard to see how they can ever turn a profit and it seems even less likely that nonprofits, such as Proxy Democracy, would ever be able to offer users the option of voting on a Proxy Democracy platform. Such costs need to be eliminated or minimized if a robust open CDV system is to mature.

The NYSE should consider forcing Broadridge to direct some of its “paper suppression fees” to firms like MoxyVote.com that should be sharing in this incentive, since shifting to electronic from paper voting saves money. That would be a simple way of beginning to address the cost issue. The most fundamental point regarding costs is that issuers should bear the actual cost of voting, not shareowners or CDV systems.

Conclusion

An open CDV system improves corporate governance because voting advisors will make it easier for shareowners to meaningfully participate in voting, without having to read through proxies. Open CDV systems do this by allowing shareowners to informally build individualized proxy voting policies, much like formal policies maintained by many institutional investors. Unlike many institutional investors, who may ponder over their voting policies for months, retail shareowners will mostly build default policies based on brand identification. Voting advisors, chosen by shareowners through competitive markets for shared information, will help make agents more accountable and democracy in corporate elections an emerging reality.

(Note: this post is reprinted from Harvard Law School Forum on Corporate Governance and Financial Regulation, Wednesday July 14, 2010 at 9:08 am)

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