The Shareholder Communications Coalition has formed a new website, shareholdercolation.com, to educate the general public and policymakers in Washington about challenges to the proxy voting system.
For one thing, according to the Coalition, brokers and other sales agents frequently are unable to determine the number of equity shares held by their customers for them, in turn, to vote effectively. Meanwhile, hedge funds that short stocks before a vote wield undue influence. Many hedge funds also shield how many shares they own, and how they vote them, through opaque cash-settled equity swaps.
The Coalition is also opposed to the barriers that prevent publicly traded companies from knowing the names of their individual investors, and to the practice of permitting only one company to handle the majority of proxy voting and shareholder communications. Further, the Coalition says, institutional investors control a significant proportion of the vote at American corporations but are not required to disclose their votes and are not regulated in any way.
Good corporate governance requires that we ensure integrity in the proxy voting process and effective communications between public companies and their shareholders, said John J. Castellani, president of the Business Roundtable, which is one of the five companies that make up the Coaltion. The current proxy system is outdated and badly in need of fundamental reform. We look forward to working with Congress and the SEC to address these problems as part of a broader review of how best to regulate financial markets in the future.