Individual investors are increasingly losing their voices (via proxy or in person) in crucial shareholder voting matters. The reason for this under-representation has nothing to do with anything as exciting as deceptive business practices or secret votes. It's just that fewer individual shareholders are choosing to return their proxies.



This lack of return creates many dilemmas for companies that wish to proceed with the voting process. After all, for voting to take place it is necessary to reach a quorum, which is the number of shareholder and/or proxy votes that are required to conduct business (typically a majority of the shareholders). If a quorum cannot be reached due to lack of votes then many times the Ten-Day Rule can be utilized.

The Ten-Day Rule allows brokers to vote proxies for shareholders who have not turned in their votes ten days prior to a meeting at which voting will take place. This rule can only be applied to routine matters, which provides an ambiguity that is quickly being defined and amended.

Non-routine issues such as equity compensation plans must be voted on by shareholders. Soon there may be Election Contest Rules enacted that would require shareholders, not brokers to vote in controversial director elections or when there is a recommendation for an Election Contest as well.

Serious problems for companies are caused when individual proxies are not returned and the Ten-Day Rule is not applicable. Individual investors and brokers both tend to vote on behalf of the company management, but institutional investors don't always have the management's best interest in mind. They do however always return their proxies. This can give them over-representation in the voting processes and unfair control of the companies.

Why the Indifference to Voting among Individual Investors?

There are many possible reasons why individual investors are not returning their proxies in the numbers that they used to. These investors may not realize the importance of their votes. They may be too bogged down by paper work and short on time to bother with it. They may be concerned that their votes could effect their standing in the company or they may harbor other privacy worries.

Many could find the wording of the ballots filled with industry jargon and hard to understand. Some may believe that others would do the job for them. The reasons for not sending in proxies are as unique as the individual shareholders themselves.

How to Improve Proxy Returns

What can be done to encourage individual investors to vote on their behalf? Well thought-out communication and educational campaigns designed to call shareholders to action can help.

Battle plans must be devised to educate company shareholders on the importance of and the value of their votes. Companies need to communicate this message to individual investors in an inviting format that is filled with language that is to the point and easy to comprehend.

Getting individual investors to want to read and learn about the value of their vote is the crucial element in getting them involved the voting process.

Finding Help

Thankfully, there are resources available to assist in educating and informing individual investors of company goings-on. Both shareholder services agents and transfer agent companies, such as First American Stock, serve to strengthen the communication and understanding between shareholders and the public companies that they are investing in.

After all, communication lines between shareholders and companies must be open and comprehensible on both ends in order for proxy solicitations to be successful. That's where the help of a good transfer agent can be crucial. Transfer agents that listen to a company's unique challenges and concerns will likely be able to better communicate issues to their investors and to yield a superior response from them.

That's why it is so important to select a transfer agent that will pay full attention to the details of a company's requests and see that they are addressed promptly and professionally. This kind of friendly and personalized service works well for the company, and it will translate to its shareholders as well.

Transfer agents will work for companies to maintain records of shareholder ownership and assist them with their annual proxy solicitations. Ensuring that ballot issues, upcoming management elections and other concerns are well communicated and understood by shareholders will reinforce the value of their votes.

This matter is of course crucial to the future of companies because when individual investor votes aren't returned, their voices are lost and others are heard in their place.