Fair corporate suffrage is an important right that should attach to every equity security
Source: United States Congress, 1934
There’s no small irony that the first shareholder voting regulations were introduced in the aftermath of ‘The Great Crash’. Now, another market collapse has brought regulators full circle and owners of US companies finally have their chance to realign their economic and ownership rights.
Over the next 90 days investors will have the opportunity to respond to the Securities and Exchange Commission’s (SEC) first review of the proxy system since 1976. Across 152 pages, the SEC’s ‘Concept Release’ (Green Paper) on shareholder voting and communications issues raises a number of key questions about the way issuers and shareholders communicate in the proxy process. The Release is organised into three broad areas: (1) the accuracy, transparency, and efficiency of the voting process; (2) issues involving shareholder communications and participation in the proxy process; and (3) the relationship between voting power and economic interest. The specific issues that the SEC is seeking comment on include:
- over-voting and under-voting of shares;
- proxy vote confirmation;
- proxy voting by institutional securities lenders;
- proxy distribution fees;
- issuers’ ability to communicate with beneficial owners of securities;
- potential means to facilitate retail investor voting participation;
- data-tagging proxy-related materials;
- the role of proxy advisory firms;
- dual record dates; and
- “empty voting.”
Commenting on the announcment of the Concept Release, SEC Commissioner Luis A. Aguilar said: “the longstanding goal of the proxy system is to restore to shareholders their traditional ability to control the corporation, and it is vital that this system is effective”.
Shareholder Communications Coalition spokesman Neils Holch applauded the publications of the Concept Release: “In the view of the Coalition, there are significant issues with the current system that need to be addressed, We welcome this long-overdue evaluative process and intend to be an active participant in the public policy discussions that will now begin in earnest.”
Manifest will be contributing to the SEC’s deliberations and sharing its experiences of the problems associated with the current cross-border voting process. Active and engaged shareholders are, in our view, being short-changed by a system that suffers from significant operational shortcomings directly attributable to a lack of open competition and diversity. While the European voting system has made significant progress in the past 18 months, the influence of US custodial bank ‘standard operating procedures’ and enforced product bundling are standing in the way of informed dialogue.