investing

Why your proxy vote matters in proxy season

Does it even matter?

Sometimes corporations may not like what their shareholders have to say, and they may not want to be caught off guard. In 2012, Citigroup Inc. shareholders roundly rejected the proposed executive pay packages, which came as a surprise.

"Obviously if you propose something as management and shareholders vote it down, it's dramatic and significant. And you can't ignore it. You'd be rather foolish to ignore the message your share owners are sending you," says Timothy Smith, director of ESG share owner engagement at Walden Asset Management in Boston.

"Exxon Mobil, for example, had a pretty large 'no' vote last year (on pay packages). This year they had a webinar (and gave a presentation) on their pay package and its merits. A company like Exxon Mobil isn't going to do that if they don't care about what the vote is," he says.

Similarly, corporate management types take shareholder initiatives seriously. They may not always be interested in instituting the changes, but "companies are definitely willing to sit down and discuss it -- especially with their larger institutional clients," Clarke says.

Usually if shareholder resolutions collect 10 percent or 20 percent of votes in favor, it's enough to be addressed by the company management.

On the other hand, sometimes shareholder resolutions don't even make it to a vote.

"The more dramatic example is when shareholders sponsor a resolution and a company says either, 'I think this is going to pass' or 'I don't want to have this debated at the shareholders meeting.' Or maybe, 'We agree with most of the issues.' Then management would say, 'We're willing to make a proposal for change if you withdraw the resolution,'" says Smith.

"And the specter or the possibility of an actual vote at the shareholder meeting prompts change," he says.

Why proxy voting matters

Like most investment mailings, proxy voting materials tend to be complex and a little esoteric. In most cases, the nominations for the board of directors are not particularly well-known people, and the other issues up for a vote can also require some research.

"It's not something you would take on vacation to read. Nevertheless, it is an important document to go through. There are organizations that can assist you," Kayal says.

Investors can learn about the issues at a couple of different websites and see how advocacy groups, mutual funds or pension funds have voted. Both Moxyvote.com and Proxydemocracy.com give retail investors some context in which to evaluate their proxy statements, which might make it a little harder to toss and forget about.

Mutual fund investors can find out how their funds voted by going to the fund family's website and looking for their proxy voting guidelines. If you disagree with their voting policies, "then you can write to them and discuss how they should be changed," McRitchie says.

"Where you would have more clout, if you have a 401(k) plan or if you're a public employee, then you can go to your employer and say, 'Hey, I noticed that this fund is voting this way -- can we ask them to change?'" he says.

If a few other employees make the same request, it can start to make a difference because institutional investors don't want to lose business.

As shareholders of common stock in publicly traded companies, investors have a right and a responsibility to pay attention to how the company is run and suggest ways it could be better. That can lead to better returns for everyone.

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