Our President & Chief Operating Officer, Sherry Moreland, recently joined a roundtable of investors, issuers and market participants hosted by the Securities and Exchange Commission (SEC) to explore effective shareholder engagement and discuss current proxy voting mechanics and technology. The session addressed calls for reform in U.S. proxy voting following recent claims that the system is “broken.” The panel provided stakeholders with the opportunity to identify the underlying causes of the issues and provide recommendations for the best way to move forward.
Among the main issues discussed were discrepancies in vote tabulation, which has caused instances of over- or under-voting. Most notably, the P&G/Trian proxy contest of 2017, which had a final voting margin of a quarter of 1 percent out of 2 billion votes cast, stressed the importance of accurately counting each vote. In addition, inconsistencies in the practices of allocating votes during stock lending has created hurdles in finalizing counts. As Ken Bertsch of the Council of Institutional Investors noted, the SEC should take steps to ensure routine and reliable vote confirmation for shareholders.
The solution to this problem, as Mediant has long maintained, is implementing digital, automated systems to enhance the accuracy of the voting process. We’ve built our technology to enhance shareholder engagement and streamline the voting proxy system for banks, brokers, corporate and fund issuers, and shareholders. Our automated platform can detect and communicate vote discrepancies in real-time, allowing for adjustments before the votes are even sent to the tabulator. We believe applying this tech-forward approach across the current proxy system will create clear channels of communication and transparency for all parties involved.
Another main theme throughout the discussion was the unnecessary complexity of the proxy voting system, which can be addressed through measured reform rather than a complete overhaul. One such instance is a contested election of directors. Currently, shareholders receive two different proxy cards for contested director nominations: one from the company and one from the dissident. This process fails to give shareholders full and clear information before casting their votes.
Universal proxy cards eliminate confusion, enabling investors to be confident that they are fully informed when voting their preferred slate. As Sherry mentioned on the panel, the universal ballot will reduce complexity in the proxy system, which in turn will encourage shareholder engagement.
Mediant applauds Chairman Clayton’s coordination of the Roundtable, as it is a productive first step toward reforming the proxy voting system. It’s clear that the industry consensus calls for increased accountability and modernizing the system, and we feel this will best be accomplished by embracing existing and emerging technology. The reform process remains a collaborative effort and we will continue to advocate for reform. Stay connected with us to learn about our recommendations for industry enhancements.