PALM DESERT, Calif.: The idea is simple. When sending out a notice that proxy voting material is online … send out the proxy card that lets a shareholder vote at the same time.
That would greatly improve the rate at which shareholders would actually vote, believes Martin Dunn, a partner in the corporate finance practice of the O'Melveny & Myers law firm in the nation’s capital.
But making it easier to vote in this fashion will not lead to more informed voting, countered William M. Tartikoff, senior vice President and general counsel of Calvert Group, in a session on modernizing the proxy voting process held at the 2011 Investment Company Institute Mutual Funds and Investment Management Conference. He says it could “make fun of shareholder democracy.”
First, the case for including a voting card, in an initial electronic proxy notice.
Instead of sending out a full set of materials by electronic mail, Dunn says companies should be required to send out one or two pages of information that “tells you where everything is and you can go get them.” And the card should be included that shows the issues on which votes are being sought, the board’s recommendations on them and includes the ability to immediately vote, interactively.
“It’s one of those ideas that made too much sense to ever live,’’ said Dunn, who spent 20 years in various positions at the Securities and Exchange Commission, most recently as Deputy Director, and former Acting Director, of the Division of Corporation Finance.
Currently, SEC rules will not allow companies to put the proxy card in with that notice.
“So you can’t look at this and say, if I want more information, fine,’’ said Dunn. “ If I’m happy where I am, I can vote on this now. You have to physically go somewhere else and do something else.’’
“And who knows if this is a cause or effect,” he said. “But the level of retail voting in an electronic proxy (ballot) goes down. That’s pretty much well known.”
This is odd, he says, because “I can go to market and buy a stock without ever looking at a computer or buy a public offering without looking at prospectus being delivered to me,’’ he said. The irony: Voting immediately on a stock has a higher hurdle than buying the stock in the first place, “which seems a little out of whack.”
But voting is a serious matter – and the abbreviated amount of information on a proxy voting card is not sufficient to get shareholder proposals adequately reviews and voted upon, said Tartikoff at Calvert Group, which markets mutual funds that invest in socially and environmentally responsible companies.
He used the example of a recent AT&T proxy mailing that he said he received that included three shareholder proposals. The proxy card listed the three proposals and the fact that the board in each case recommended voting against the proposal.
The titles of the three proposals were simply “political contributions,” “special stockholder meetings” and “privileged consent,’’ he said.
And if you get to vote right away, those proposals won’t be understood properly, he contended.
“If you actually find the three shareholder proposals, they’re not crazy,’’ he said. “They’re not silly people writing silly proposals.”
“People can disagree whether or not you should vote for them or against them,’’ he said. “So to separate the card from the information I think is wrongheaded and really hurts shareholder democracy.”
Sending out summary proxies, as has been permitted by regulators, may be middle ground, he said.
“But to separate it totally just makes fun of the concept of shareholder democracy.’’
Not the case, said Dunn. With the abbreviated mailing, “everything is there. It’s not telling you not to vote uninformed. It’s telling you exactly where it is. It’s just making it easier to vote.’’
Making investors make informed decisions may be an impossible goal – or even undemocratic.
“If it helps with voter response, it’s a significant improvement in the system,’’ said Bruce H. Goldfarb, president and chief executive officer of Okapi Partners, a proxy solicitation and investor response firm in New York. “Ultimately, we’re never going to get to the stage where we’re going to only allow investors make informed decisions when they vote. That is not the democratic process.’’