Chairman Schapiro, tear down this wall!

"Stop the madness, it's time to take down the wall between companies and their shareholders."  That's the message from a website (www.reformtheproxysystem.com) brought to us by the so-called "Subcommittee on Proxy Reform" - a group of transfer agents (American Stock Transfer & Trust Co., BNY Mellon Shareowner Services, Computershare, Continental Stock Transfer & Trust Co.,  Georgeson, and Registrar & Transfer Co.).

Check out the cartoon video on the website (wonder if it was done be the same people that created the Moxy Vote animation).  Hat tip to www.insideinvestorrelations.com and www.thecorporatecounsel.net.

 [I've now added the video below.]

Client Directed Voting - White Paper Published by Council of Institutional Investors

The SEC's concept release notes that commentators have recommended that the SEC adopt rules to facilitate "client-directed voting" (CDV) as a means to increase investor participation in the voting process. The SEC prefers the term "advance voting instructions."  On August 31, 2010, the Council of Institutional Investors(CII) published a 36 page white paper.

The punch line of the paper is that it recommends continued evaluation of CDV but does not endorse the concept.

"The complexity of CDV and the policy and regulatory issues it entails suggest to us that a robust CDV model is likely to have a long gestation period, particularly since any CDV model must be considered in light of the wide range of proxy infrastructure questions that the SEC is now raising as part of its concept release. Other regulatory changes may be more expeditious and, possibly, more effective tools to increase [retail beneficial owners] participation. Regulatory changes that would simplify the voting framework and enhance communications generally, such as through the elimination or adjustment of the OBO/NOBO framework to favor disclosure of shareowner identities or by promoting more robust broker-dealer online voting platforms, seem to us to be a more effective approach that should merit priority consideration. Perhaps more importantly, at least some of these other reforms can be achieved — in contrast to CDV — in a way that does not require consideration of investor protection principles that underpin the SEC’s proxy rules." 

Influence of Proxy Advisors (like ISS/Riskmetrics)

A comment submitted in response to the SEC "proxy plumbing" concept release attaches a couple of law review articles. One of the authors states: 

As our articles note, the potential influence of proxy advisory firms is likely to increase with the adoption of new initiatives regarding shareholder voting such as say on pay, majority voting, the elimination of broker voting and, potentially, proxy access. We are concerned about the potential influence exercised by private organizations that lack an economic stake in the companies they evaluate. In particular, we are troubled by the absence of mechanisms to hold proxy advisors accountable for their recommendations. We question whether investors have adequate incentives and information to allow market forces to monitor the quality of the information provided by proxy advisors. We note that federal regulation has fostered the growth of these firms by creating a need for institutional investors to document the rationality of their voting procedures. Although our study suggests that not all institutions blindly follow the ISS recommendations, they nonetheless rely heavily on proxy advisors in making their voting decisions

I get a kick out of the Moxy Vote video

What some retail investors think - comment letter excerpts

An excerpt from a longer, thoughtful comment letter:

These questions relate to what factors encourage or discourage retail investors from thoughtful voting of their proxies. Before I drill down into them, let me first provide the rationale behind my own proxy voting:

• In the event of a major proposal that would seriously dilute or otherwise endanger the long term value of my shares, I will not vote at all. The only hope for the small retail investor is for the company to fail to reach a quorum.
• I vote against directors who have been in their position for more than 5 years. Any new ideas they might have contributed, they've already had 5 years to provide them. Time for new blood. Ditto for directors over the age of 70.
• I vote against directors who are members of a family or organization that have voting control over a significant fraction of outstanding voting power. Their interests are unlikely to align with retail investors.
• I always vote against the current auditor. We've lost far too much money because accounting firms were too cozy with the companies they were hired to audit. Routinely changing out auditors is a strong deterrent to financial shenanigans and fraud.
• I vote against management-drafted proposals that either benefit management far more than the rank-and-file employees or that would reduce stockholder checks and balances on management actions. 

• I vote for all proposals submitted by outside stockholders with the exception of those that are clearly bad ideas and almost all those submitted by religious groups.

. . .

I do not see what the SEC can do specifically around website education for proxy voting that is not already present in proxies by law or regulation. If you do want to help retail investors to better understand their rights and roles, I would do what the FDIC did and hire Suze Orman as a spokesperson to get the message out.

Another commenter is a strong supporter of "advance directive voting":

As an investor in the public market place, I am constantly throwing into the trash proxy statements, proxy cards and other SEC filings. Despite my background, I do not have enough economic interest in any of my investee companies to spend the time and effort to analyze their corporate governance situation. If for some reason I decide that I do not like the company, I sell the stock and do not try to change the corporate governance structure. I believe that my attitude is similar to the attitude of most individual investors.

. . .

I would love to be able to permanently direct my broker to just vote in favor of all management proposals, subject to my ability to revoke that instruction. I would also like the ability to permanently instruct the board of directors' chosen proxy agents to vote in favor of all management proposals, subject to my ability to revoke that instruction. Finally, I would like to be able to direct my broker and the investee company to not send me any SEC filings since, for me, they just waste the company's money. I recognize that there may be some unusual individual investors who really enjoy reading SEC filings, but I am not one of them. Therefore, I only request that this right to not receive SEC filings for me and other people who are like-minded.