Empowering Retail Investors in Proxy Voting

Every year, public company shareholders are asked to vote on important corporate governance issues during the “proxy season” that leads up to companies’ annual general meetings. Proxy season gives investors the opportunity to provide input to management and boards about the direction of a company.  

However, retail investors, who hold stock directly in companies, have historically voted at a fraction of the level of institutional investors. 

According to Broadridge, over the last five proxy seasons, retail investors voted on average about 30% of their shares. On the other hand, institutional investors – such as mutual funds, exchange-traded funds, and pension funds – typically vote over 80% of their shares.

The Chamber has long encouraged greater participation by retail investors in the proxy process. Low retail investor participation has allowed proxy season to be swayed by special interests that use shareholder proposals and other methods to advance ideological agendas at public companies that are not intended to create shareholder value, drowning out average retail investor voices.  

This week, the SEC took a major step towards increasing retail investor participation by granting “no-action” relief to a voting platform proposed by ExxonMobil. This first-of-its-kind platform will permit the company’s shareholders to provide standing voting instructions to the company to vote shares in line with the board’s recommendations. 

 The platform offers key benefits to shareholders including:  

• Simplicity: The platform allows retail shareholders to provide standing instructions and vote their shares at no cost during proxy season. This should help increase participation, particularly amongst shareholders that historically have not voted on proxy matters. 
• Optionality: Shareholders can opt-in to the program if they choose and are able to withdraw their voting instructions at any time. 
• Giving a voice: Retail shareholders of a public company simply want that company to perform well and deliver sustainable returns over time. Giving retail shareholders a greater voice in proxy matters will help mitigate the influence of agenda-driven special interests.  

The position taken by the SEC this week should open the doors for other companies to adopt similar platforms and increase retail voting. This would help strengthen the governance of public companies and keep retail shareholders active in the proxy process. 

The Chamber is pleased to support this initiative and the action taken by the SEC this week, and we will continue to work to ensure that all investor voices can be heard.

About the author

Bill Hulse

Bill Hulse is the former Senior Vice President at the U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC).