Moxy Vote Blog

Proxy access has been the talk of the town this week after the SEC on Wednesday voted 3 to 2 (along party lines) to grant the right to shareholders to nominate directors.  It has been a long process as many shareholders have fought for years to finally get this approved.  Moxy Vote wants to commend the SEC for their decision.  Although the 3% ownership threshold is high and the three year holding period extremely long, it is a step in the right direction.

Why is this important?  Until now, the ability for shareholders to nominate a director that has not been hand picked by management has been nearly impossible.  Could an independent voice on a board of directors at say Lehman Brothers or BP or AIG been the difference in averting disaster? Maybe not, but it would have been nice to have had the opportunity to test that theory…

Here at Moxy Vote we are very excited about our new partnership with the non-profit BetterInvesting. Since its beginnings, BetterInvesting has served the investment education needs of more than 5 million people. “We’re excited to work with Moxy Vote,” said Kamie Zaracki, CEO of BetterInvesting, “Since 1951 our association has been advocating that investors aren’t simply holders of stock shares, they’re owners of companies who should participate in the ownership by voting their proxies.”

As the nation’s largest non-profit of it’s kind, BetterInvesting brings us a wealth of experience and insight on how to reach retail investors. Together we can put more information in the hands of retail investors and show them how easy it is to vote their proxies.  

Learn more at www.betterinvesting.org

One of our founders, the mussy-haired Doug Gates, was on the Fox Business Channel today with Liz Claman. Doug talked about the possible regulatory changes regarding “proxy access” and the potential impact on corporate governance. Have a listen to this clip and find out what he said about lunatics and their asylums.

The SEC is expected to approve new proxy access rules next week, allowing shareholders to more easily nominate corporate directors.

Take a look at another great post by Jim McRitchie on his blog last week describing the barriers (including costs) shareholders face when attempting to vote their proxies (Who Will Pay for CDV/AVI?).  It is obvious to all that the current system is not a level playing field for the individual shareholder.  At Moxy Vote we are addressing this problem.  The SEC can help shareholders by making changes to the system that make it easier for individuals to participate - removing bottlenecks and addressing costs are a good place to start.  These improvements will help not only Moxy Vote but also assist all organizations that attempt to provide easy, efficient and informed ways for individuals to vote their proxies.  Is a level playing field too much to ask for?

Earlier this summer we talked in more detail about the SEC’s Concept Release on the Proxy Voting System on our blog (SEC concept release:  scrutiny of proxy voting and The Game of Telephone). Before the 90 day comment period is up, we will be submitting our suggestions to the SEC on how they can make it easier for the individual shareholder to vote their proxies.  When we do, we will post them here with ways you can comment to the SEC as well.

Who’s between a company and its shareholders? According to the SEC, it’s merely brokers, banks, custodians, securities depositories, transfer agents, proxy solicitors, proxy service providers, proxy advisory firms, and vote tabulators. Here’s the quote from their Concept Release on the US Proxy System:

The manner in which proxy materials are distributed and votes are processed and recorded involves a level of complexity not generally understood by those not involved in the process. This complexity stems, in large part, from the nature of share ownership in the United States, in which the vast majority of shares are held through securities intermediaries such as broker-dealers or banks; this structure supports prompt and accurate clearance and settlement of securities transactions, yet adds significant complexity to the proxy voting process. As a result, the proxy system involves a wide array of third-party participants in addition to companies and their shareholders, including brokers, banks, custodians, securities depositories, transfer agents, proxy solicitors, proxy service providers, proxy advisory firms, and vote tabulators.

In the US, the children’s game is known as Telephone. Elsewhere in the world, it’s known as Chinese whispers, Grapevine, Broken Telephone, Whisper Down the Lane, Gossip, Le Téléphone Arabe, and Stille Post.

Do you know what it takes to get that freshly-baked proxy ballot in your mitts every year? Under the illusion that the company annually queries their shareholder database and performs a massive Mail Merge? Start with the fact that companies don’t even know the names of most of their shareholders, complicate this with the reality that your shares are likely held in your broker’s name, and spread this over millions of shareholders and thousands of companies.

Here’s the SEC’s diagram revealing the complexity of the industry that has evolved under these conditions:

A little more complicated than you were expecting?  Yeah, me too.

“Farming looks mighty easy when your plow is a pencil and you’re a thousand miles from the corn field.”  –Dwight D. Eisenhower

On July 14, the SEC published the Concept Release on the US Proxy System. They occasionally issue these releases, maybe two or three times a year, when they’re considering substantial problems. They want your feedback.

This time around, the SEC describes our current proxy voting system, its consequences on shareholder communication and participation, and the imperfect coupling of voting power and economic interest. From the introduction to this document:

…we are reviewing and seeking public comment as to whether the U.S. proxy system as a whole operates with the accuracy, reliability, transparency, accountability, and integrity that shareholders and issuers should rightfully expect. With over 600 billion shares voted every year at more than 13,000 shareholder meetings, shareholders should be served by a well-functioning proxy system that promotes efficient and accurate voting.

If you have something that might help the SEC think this through, drop them some comments before October 20th. Last November, Moxy Vote formally submitted some thoughts of our own on the challenges posed by the current system and the power of technology to address some of these challenges.

Two weeks ago, Moxy Vote was honored to participate in the Yale Governance Forum in New Haven. The thoughtful-looking guy on the right is our own Mark Schlegel, part of a panel on “How are Online Tools and Social Networking Changing Corporate Governance?”

Mark has asked me to thank Ira Millstein and Stephen Davis for this opportunity. So thanks, Ira and Stephen. Mark was happy to share his perspective on the implications of crazy new technology on this formerly staid industry.

This is embarrassing, but I’ve been seeing another blog.

Read my brief essay on Proxy Voting 101 over at Angry Bear Blog.

Moxy Vote would like to welcome our three newest advocates: Domini Social Investments, Ceres and F&C Asset Management.

Domini Social Investments is an SRI firm that has filed more than 200 shareholder proposals at more than 80 companies. They were also the first mutual fund manager in the U.S. that made its proxy voting record public. In fact, it even petitioned the SEC to require that all mutual funds do so. For over 15 years, it has helped reform corporate behavior through its shareholder activism program.

Ceres is a national network of investors, environmental organizations and other public interest groups. Its mission is to “integrate sustainability into capital markets for the health of the planet and its people.” By helping companies and investors implement sustainability on issues like the reduction of green house gases, Ceres plays an important role in shareholder activism and corporate reform.

F&C Asset Management is a leading diversified multi-specialist investment management group. It is an independent group with offices in eleven countries. As one of Europe’s largest shareholders, they promote the use of better environmental, social and governance practices at companies.

We are thrilled to have these advocates on Moxy Vote. 

As You Sow, Green Century Capital Management and Sierra Club are Moxy Vote advocates that saw their coal ash resolutions gain big attention at CMS Energy’s annual meeting on May 21st. The proposal that requested a report on the company’s efforts to reduce “environmental and health hazards associated with coal combustion waste” garnered 43 percent of the vote. The proposal asking the board to “establish quantitative goals for reducing total greenhouse gas emissions” gained 35 percent. In response to the former resolution Emily Stone, a shareholder advocate for Green Century Capital Management was quoted in the Wall Street Journal story saying “This is an issue many investors view as material.”

A spokesman for CMS Energy said the utility got the message.

“We’ve heard from the shareholders that, in a large sense, ‘We want more information.’ ” spokesman Jeff Holyfield told the Jackson City Patriot. In response, CMS will create a corporate social responsibility page on their website. Its content is still being discussed but should be complete by the end of the year.

Amy Galland, research director of As You Sow summarized the shareholder resolutions by saying “This vote sends a very strong message to CMS that shareholders are concerned about how the company is dealing with coal ash contamination of Saginaw Bay and also how it is managing risks at all its facilities to avoid future contamination and cleanup costs.”