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Investors Losing Their Power - Discuss Your Issues
Individual investors are increasingly losing their voices (via proxy or directly) in crucial shareholder voting matters. The reason for this under-representation has nothing at all to do with anything as exciting as deceptive business practices or secret votes. It is just that fewer individual shareholders are choosing to return their proxies.
This lack of return produces numerous dilemmas for companies that need to proceed with the voting process.
After all, for voting to occur it really is necessary to reach a quorum, which is the number of shareholder and/or proxy votes that are needed to conduct business (typically a majority of the shareholders). If a quorum can't be reached because of lack of votes, then many times the Ten-Day Rule could be utilized.
The Ten-Day Rule permits brokers to vote proxies for investors who have not turned in their votes ten days before a meeting at which voting will take place. This rule may only be applied to routine matters, which offers an ambiguity that is rapidly being defined and amended.
Non-routine challenges from equity capital markets such as emerging capital from equity capital market plans must be voted on by shareholders. Soon there might be Election Contest Rules enacted that would require shareholders, not brokers to vote in debatable director elections or when there is a recommendation for an Election Contest as well.
Serious problems for businesses are brought on when individual proxies are not returned and the Ten-Day Rule just isn't applicable. Individual investors and brokers both tend to vote on behalf of the company management, but institutional investors do not always have the management's 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 company.
Why the indifference to voting among individual investors?
Many may find the wording of the ballots filled with industry terminology and hard to fully grasp. Some may think that other people would do the job for them. The factors for not sending in proxies are as unique as the individual shareholders themselves.
How you can Improve Proxy Returns
What may be done to inspire individual investors to vote on their behalf? Well thought-out communication and educational campaigns designed to call shareholders to action will help.
This matter is obviously crucial to the future of businesses because when an individual investors votes aren't returned, their voices are lost and other people are heard in their place.
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