Voting Your Shares Starts to Matter

 “What would happen if all the small investors banded together and cast their ballots during proxy season …?” the New York Times asks in an article that cites the contribution of ProxyDemocracy in educating shareholders. “How much of an impact would they have?”

It’s possible they could have more of an effect on corporate actions than ever, the Times says.

“More voter resources are beginning to sprout on the Web that aim to educate smaller investors, demystify the issues on the ballot and make voting easier,” according to the Times.

Organizations like ProxyDemocracy are helping shareholders to make decisions on issues like executive pay and corporate governance — and to increase their influence, writes Tara Siegel Bernard.

Individual investors own about 30 percent of outstanding shares, and have a much larger stake when their holdings in pensions and mutual funds are taken into account. While historically only a fraction of retail investors have voted their proxies, they do have the power to sway results, especially in close contests.

“Thirty percent of outstanding shares is a substantial portion, easily enough to change the outcome of many proxy voting results,” Mark Latham, a member of ProxyDemocracy’s board of directors, told the Times.

Nell Minow, co-founder of The Corporate Library, is quoted as saying that small stockholders should research how activists, such as the California Public Employees’ Retirement System, plan to cast their ballots.

Reporting how respected institutions will vote is one of the core services delivered by ProxyDemocracy. And Calpers is one of the key members of our roster of early vote disclosers.

The article points out how investors could benefit from changes in policy implemented or contemplated by the Securities and Exchange Commission and Congress. 

They don’t have to wait to help themselves, however. Mutual fund holders, whose managers vote proxies on their behalf, can shop around to find those that do the best job of voting their interests, Latham said.

“The biggest thing you can do is find a better mutual fund,” he said. “If you are in a Standard & Poor’s 500 index fund, there are many S.& P. 500 funds. But some vote better than others, and that is the biggest leverage you have.”

Comparing the voting records of funds is another of our key services. Go here to see how your fund votes.

Mutual Funds Quiet on Bank Pay

MarketWatch suggests mutual fund companies should adopt a more pro-consumer approach to proxy voting, especially on issues such as executive pay. The column also points out the value in tracking the voting records of mutual fund firms — one of the core services offered by ProxyDemocracy.

MarketWatch cites the example of Lazard Ltd. The investment bank paid 72 percent of its annual revenue to staff in compensation and benefits in 2009, an increase from 56 percent in revenue the year before, while profit declined 95 percent, according to MarketWatch.

Large shareholders of Lazard, including Pioneer Investments and T. Rowe Price Group Inc., declined to comment on the shift, MarketWatch reported.

“Their silence illustrates how much of Wall Street operates,” MarketWatch said. “While mutual funds — and large institutional funds — nominally represent individual investors, it’s rare for them to speak out on issues.”

Russel Kinnel, director of fund research as Morningstar Inc., is quoted as saying fund firms seldom take a public stand against management over compensation. While managers do talk privately to companies about pay, Kinnel said they worry that taking the issue public would limit their access to, and information from, corporate management.

Funds should be tougher and more public when they oppose pay practices, said Nell Minow, president of the Corporate Library, which focuses on corporate governance.

“Fund managers could make [all] the difference,” Minow told MarketWatch.

One of the remedies Minow suggests is to grade funds on their proxy votes — a big part of our work at ProxyDemocracy. We examine fund company balloting in four key areas: the election of directors, compensation, corporate governance and corporate impact. We also keep score. It’s part of this organization’s mission to ensure corporations and funds are accountable to their shareowners.

Incidentally, Pioneer ranks ahead of most of its peers in ProxyDemocracy’s running tally. The firm is considered more activist on our scale than 70 percent of fund families; on the issue of compensation, Pioneer is in the top 18 percent. T. Rowe Price is in the 50th percentile in an average of all the voting categories and ranks behind two-thirds of firms in votes on executive pay.