Investing in a company makes you a partial owner, whether you’re constantly refreshing your day trading apps or sporadically conferring with your financial advisor. With your ownership comes the responsibility and opportunity to influence its future.
As a shareholder, you get a vote in how the company is run, in proportion to the amount of shares you own. Unfortunately, an average of just 30% of shareholder votes are exercised. Many shareholders don’t realize the difference that their input makes and may not understand the various voting methods and processes, including by proxy (i.e. remotely).
Voting helps enterprises improve, boosting the long-term value of everyone’s holdings. Here are three reasons to make your voice heard on resolutions and proposals.
1. Protect your investment
Shares are true assets. Just like your new car’s engine and your dream home’s foundation, you have a vested interest in their performance. Voting is an opportunity to participate in the decisions that can affect your investment.
Last year, Covid-19 safety measures moved annual shareholder meetings online resulting in a 500% increase in VSMs (virtual shareholder meetings). VSMs with shareholder proposals saw more attendees, questions, and day-of voting. Investors were empowered to participate and get key information, and tools like Broadridge’s ProxyVoting mobile app made it even easier to vote.
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2. Peek behind the curtain
An organization’s structure and management often affect its reputation and value. When you have a direct stake in these variables, you also have a say in things like business strategy and corporate governance. Annual shareholder meetings give you an understanding of the key issues you should weigh in on.
Shareholders can be asked to vote on everything from executive compensation (“say-on-pay”) to independent chair elections to board leadership and composition. Voting on these items reinforces your role as a valued participant in a company’s journey and helps company leaders to understand what is on shareholders’ minds. This encourages leaders to make future decisions with shareholder sentiment in mind. When everyone is considered, everyone wins.
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3. Promote issues you care about
Investing in a firm or fund grants you the right to vote on the issues you care about. Shareholder resolutions can tackle heavy subjects like climate impact, gender/racial pay equity disclosure, anti-discrimination practices, government lobbying, and environmental, social, and governance (ESG) matters. When these topics arise, you can vote in the way that best promotes your interests. In fact, if you have invested in a business for one year or more and hold at least $2,000 worth of equity value (or 1% of outstanding shares) you can submit a shareholder proposal yourself.
With any proposal, there will likely be two (or more) sides and competing priorities at play. To cast an informed vote, it’s critical to weigh management recommendations and strategic corporate objectives, as well as your own independent research. This is a chance to learn more about the companies in your portfolio and pave the way for future improvements to both the enterprise itself and the value of your stock.