Increasing retail shareholder voting key to greater approval rates, study by PwC and Broadridge concludes
While retail shareholders own about a third of the shares of publicly listed US companies, around 70 percent of those shares are not voted at annual shareholder meetings, according to a study by PwC and Broadridge Financial Solutions.
The low voting turnout of retail investors presents a missed opportunity for the companies’ management because retail shareholders ‘support management’s voting recommendations at high rates,’ note the authors of the ProxyPulse study of yearly trends in proxy voting.
‘Simply stated, an objective of engaging with this important group is to get it to vote,’ concludes the report. ‘Newer communication channels make it more efficient for companies to engage with retail shareholders – and more convenient than ever for them to access proxy materials and vote.’
The study covers all 549 annual shareholder meetings held between the start of the year and April 23, or about 11 percent of all shareholder meetings of the 2013 proxy season, according to a PwC and Broadridge press release. The companies plan to release ProxyPulse study results annually starting this year, with results based on Broadridge’s processing of shares held in street names that constitute more than 80 percent of all outstanding US shares.
Overall, around 70 percent of street name shares were voted at annual shareholder meetings this year, the study shows. Institutional investors account for 60 percentage points of the total while retail shareholders account for only 10 percentage points.
‘While some companies have ramped up their shareholder engagement programs over the last few years, many of these efforts focus largely on communicating with institutional shareholders,’ says Chuck Callan, senior vice president of regulatory affairs at Broadridge. ‘The data shows that retail shareholders hold one third of the shares, and that opportunities exist for companies to better connect with these potentially influential voters.’
The study also shows that only 17 percent of retail shares that received a mailed notice were voted over the last six years, while 36 percent that received a full paper package of proxy materials were voted. Virtually all institutional shareholders received proxy materials electronically.
Increased voting among retail shareholders could have been particularly helpful to company management during some of the say-on-pay votes held so far this year, according to the study authors. Around 5 percent of votes resulted in an approval rate of between 60 percent and 69 percent – below the 70 percent threshold that triggers closer scrutiny of executive compensation by proxy advisory firms.
‘Had these companies encouraged even half of their non-voting shares to be voted with the company, the 70 percent threshold would have been exceeded,’ the study concludes. ‘During the entire 2012 proxy season, 107 companies were in the 60 percent to 69 percent range.’
