Most retail shareholders don’t take part in proxy votes but are key management supporters
This article originally appeared in Corporate Secretary in July 2017.
Companies have an array of tools that can be successful in whipping up turnout for votes at their AGMs if needed, according to industry professionals.
Retail investors continue to vote in small numbers – roughly 25 percent, according to some observers – and therefore have the potential for a sharp increase in turnout if a company is facing what it expects to be a close proxy vote.
Underlining this trend, an academic paper issued in May by Choonsik Lee of Quinnipiac University and Matthew Souther of the University of Missouri at Columbia – Department of Finance finds that notice-only delivery of proxy materials significantly reduces the voting response rate, primarily driven by the lower likelihood of a response from retail shareholders.
Getting out the retail vote is particularly useful because they have traditionally tended to give management greater levels of support than institutional investors and activists. Issuers have a number of means at their disposal to do so, professionals told attendees at the Shareholder Services Association’s (SSA) annual conference in Bonita Springs, Florida last week.
John Lopinto, manager of US Issuer Services at Mediant, said companies are moving away from labeling the outside of proxy notice envelopes with ‘AGM information enclosed’ because people tend to put such letters directly in the trash. Companies might also offer incentives such as making a charitable donation on behalf of first-time voters, he added.