What is Proxy Voting?
You have a voice and a vote if you own shares in a public company. And for most investors, your investment advisors, asset managers or other financial intermediaries may be voting your shares without you even knowing it. And worse, they may be voting for social and/or political agendas that don’t advance your financial interests.
Each year, public companies gather at their Annual Shareholder Meetings to provide a space for shareholders to ask questions, engage with company leadership, and review and vote proxies. You can think of a proxy as being similar to an election ballot – it contains important company matters that shareholders must vote on. This can include: executive compensation, election of board members, auditor selection, various shareholder resolutions, and more.
Shareholders are able to file shareholder resolutions and also nominate alternative directors for the board, which may be voted on by all shareholders. Over the last several years – ESG – environmental, social, and governance resolutions have been increasingly introduced in boardroom settings. These resolutions, which often have public engagement campaigns behind them, can distract management by requiring them to focus on initiatives that are not in the long-term financial interests of shareholders.
Proxy statements are typically sent to shareholders about six weeks before a company’s Annual General Meeting. Voting a proxy is relatively simple, but what can be challenging is understanding how to vote on the proxy to truly maximize shareholder value – especially when you may have exposure to a number of public companies in your portfolio.
When you own shares of a public company directly, you are responsible for deciding if and how you will vote your proxy. When you invest in ETFs and/or mutual funds directly or through your financial advisor, the asset manager votes and engages with public companies on your behalf. Asset managers like BlackRock, State Street and Vanguard (the “Big Three” asset managers) have become the largest nominal shareholders of most American public companies due to everyday citizens – or financial advisors on their behalf – investing in their funds.
Additionally, ISS & Glass Lewis steer the behavior of thousands of smaller asset managers – and tens of billions of dollars– to advance ESG values, often in lockstep with the Big Three asset managers. These two firms represent a duopoly by controlling near 97% of the market share of the advisory service industry. In fact, BlackRock’s new “Voting Choice” program only allows participating clients in global Separately Managed Accounts and eligible pooled vehicles to “choose” between ISS and Glass Lewis voting slates.
At Strive, we believe it’s critical to understand how your shares are being voted on your behalf by large asset managers and proxy advisory services, and what your options are if you don’t agree with their policies. Strike up a conversation with your financial advisor – here’s 5 Questions to Ask Your Financial Advisor to better understand how your investment dollars are being used to potentially advance social and/or political agendas.
If you aren’t satisfied with your asset manager or proxy advisory service, consider Strive – our voting and advocacy decisions are made with the sole interest of maximizing the value of our clients’ investment accounts – with no “mixed motivation” to also advance a social objective.
How to Take Action
See the top 5 questions you should be asking your financial advisor and supplemental material here. We’ve even added an email generator on that page that you can use to email these questions directly to your advisor.
At any time, you can instruct your financial advisor how you would like your shares to be voted on your behalf. To ensure your shares are voted in a way that maximizes shareholder return and supports Excellence, you can instruct your advisor to vote the Strive Guidelines.
If your financial advisor tells you they refuse to vote your shares for you, or that it is not part of the services that you have paid for, you can recall your own vote in many instances and may consider taking your business elsewhere.