Drops In Retail Investor Voting Continue: A Four-Alarm Fire, We Say – Start Now On Plans To Do Better

We have been writing about the drop in retail investor voting ever since the Notice and Access model went into effect. We have no beef with the IDEA behind the “model” – which has saved literally billions of dollars for issuers – but we can see that it has become a major contributor to the now scarily low levels of proxy voting by ordinary investors, who once voted over 70% of their shares. Now, at many companies the percentage is under 10% - and, as noted above, at the Disney meeting – despite all the hoopla – and the fact that individuals hold over 30% of the shares outstanding - they voted close to zero percent!

What Should Public Companies And Their Service Suppliers Be Doing Now To Get Better Retail Engagement Next Season?

First and foremost, we need to recognize that the money spent on preparing and mailing “Notices” to retail investors is going almost totally to waste – and, by the way, that the postage alone has been rising year after year.

It’s time for the SEC to recognize that the Notice can and should contain a brief, impartial summary of the items up for a vote that would allow holders to take action at once – either by signing and returning a completed card or allowing them to go straight to the Voting Site and vote there, after studying up as much or as little as they themselves decide to do.

The Notice is also the perfect place to provide retail investors with the background and education they need as to the importance of their vote - AND on how to make up their minds as to the issues on the ballot (or to simply abstain where they can’t make up their minds or are simply indifferent) – AND on the various ways they have to CAST THEIR VOTES.

Better shareholder education is sorely needed – both by recipients of Notices and by those who get e-delivery of proxy materials - and “full sets” of hard-copy materials too, as shown by the steady declines in retail-voting activity.

NOW is the time to plan on sending educational information to all shareholders prior to the 2025 Proxy Season – whether or not the SEC takes action on the Notice provisions.

Issuers - and shareholder proponents - and the SEC staff too - need to recognize that the number and complexity of shareholder proposals on the ballot ARE contributing significantly to the declines we are seeing in retail investor voting.

Issuers and would-be proponents need to do a better job of reaching reasonable compromises rather than to put fresh items to a vote. And both sides should try to add data-points to existing studies, rather than to agree on still more studies and ‘reports to investors’ which are making Proxy Materials more complex, and bulkier, more “forbidding” – and “off-putting” to individual investors.

The SEC needs to do a much better job in our opinion, of rejecting shareholder proposals that do not make a case for adding materially to the creation of shareholder value – and, especially, for proposals that, however “nice” they may sound, amount to trying to micro-manage the work that is clearly entrusted to the board.