Three vie to make electronic proxy voting universal in UK

A race to dominate electronic share balloting in Britain officially kicked off yesterday afternoon in London when the Queen gave royal assent to the Electronic Communications Bill, which permits digital signatures on proxies.

In the running are three providers: E-Vote, Manifest Voting Agency and ADP. The competition ensures that virtually all investors will be able to use electronic means to vote at most U.K. listed companies. Postal votes now travel through no fewer than six stages to reach a company. Expect most institutions soon to consign them to history. The action should lend momentum to similar moves in Europe and elsewhere.

E-Vote: Internet proxy voting only last week breached the desktops of the U.K. institutional investment community. Hermes Investment Management became the first big fund to sign with E-Vote, the web-based voting firm owned by Thomson Financial. In E-Vote's system, clients grant E-Vote general power of attorney to sign proxies on their behalf. Then they log onto a website to scan agendas, select available analyses and recommendations, and click to vote( GPW Feb 18, 2000). Until now, E-Vote has had to send the physical proxy card filled out as instructed to the company registrar. But following enactment of the e-commerce bill, E-Vote only awaits an administrative order, expected within two months, to begin legally transmitting instructions electronically. Registrars at more than 3,000 U.K. listed companies are already on board to accept E-Vote proxies, the firm says. Hermes helped pilot the product and just completed its first week of live balloting. Two of the biggest investor trade groups-the National Association of Pension Funds and the Association of British Insurers -already endorsed E-Vote. And PIRC, the governance advisor, is in talks to create an own label, EVote ballot site for clients.

Manifest: The independent, Essex-based proxy agent and analyst went live with its own VotePlus system two weeks ago. Aiming at the fund manager market, Manifest's product involves a software voting and record-keeping system connected online to a secure, VotePlus database. Clients give power of attorney to Manifest to cast ballots. From their computer screen they can call up analyses, apply or modify pre-set voting guidelines, and click to validate decisions. Manifest then tabulates all voting instructions and delivers a physical proxy card to each registrar. Like E-Vote, Manifest promises a fully auditable proxy trail. Heavyweight clients include Goldman Sachs, Morley Fund Management, Clerical Medical, Coal Management Trustees, and Hill Samuel (now Scottish Widows). Check www.manifest.co.uk.

ADP: The unchallenged ruler of proxy voting mechanics in the U.S, ADP is about three weeks away from announcing an electronic beachhead in Britain. Its model is different. Issuers rather than investors pay the bill. And ADP offers pure voting-there is no analysis or guideline selection, An investor receives an agenda in the mail, logs onto the ADP website using the supplied control number, clicks 'yes,' 'no' or 'abstain' for each resolution, and presses the submit button. The shareowner could also vote by telephone. There's no audit trail other than an automatic confirmation that the site has registered the voting instruction. But ADP specializes in opening Internet voting to beneficial owners such as small shareholders who own stakes under a broker's street name. Rivals focus on institutions. Schwab, Halifax and other brokers are already co-operating. ADP now expects to open for business handling web ballots for nearly 200 U.K. listed companies, including many investment trusts. Voting will take place on the same website ADP uses for North America: www.proxyvote.com.

Of course, the huge irony in all the focus on electronic ballots is that most won't count. Nearly all resolutions at U.K. annual meetings are decided by a show of hands of those shareowners who happen to attend. All other ballots are usually ignored in determining totals, except in the rare event that a sufficient number of investors petition a formal tally from the floor. But shareowners-and Whitehall-now see voting as a fiduciary obligation. The 1998 Hampel Committee urged a clunky compromise: companies should maintain hand votes but release proxy totals. Modernization of share voting makes that formula even more of an anachronism than it was. Expect pressure to mount for statutory reform granting automatic full voting weight to proxies.

Global Proxy Watch

26 May, 2000

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