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Investors Losing Voices - Discuss Your Concerns
Individual investors are gradually losing their voices (via proxy or directly) in crucial shareholder voting matters. The cause for this under-representation has absolutely nothing to do with anything as exciting as deceptive company practices or secret votes. It is just that fewer individual shareholders are deciding to return their proxies.
This lack of return creates numerous dilemmas for firms that need to proceed with the voting process.
After all, for voting to happen it's necessary to reach a quorum, which is the number of shareholder and/or proxy votes that happen to be needed to conduct business (normally a majority of the shareholders). If a quorum cannot be reached because of lack of votes, then many instances the Ten-Day Rule could be utilized.
The Ten-Day Rule makes it possible for brokers to vote proxies for shareholders who have not turned in their votes 10 days before a meeting at which voting is going to take place. This rule can only be applied to routine matters, which provides an ambiguity that may be rapidly becoming defined and amended.
Non-routine issues from equity capital markets such as emerging capital from equity capital market plans has to be voted on by shareholders. Soon there might be Election Contest Rules enacted that would demand shareholders, not brokers to vote in questionable director elections or when there is a recommendation for an Election Contest as well.
Really serious problems for businesses are brought on when individual proxies aren't returned and the Ten-Day Rule is not applicable. Individual investors and brokers both tend to vote on behalf of the company administration, but institutional investors do not often have the management's best interest in mind.
They do however always return their proxies. This can give them over-representation within the voting processes and unfair control of the company.
Why the indifference to voting amongst individual investors?
Many could find the wording of the ballots filled with business terminology and difficult to understand. Some might think that other individuals would do the job for them. The reasons for not sending in proxies are as unique as the individual shareholders themselves.
Tips on how to Improve Proxy Returns
What may be carried out to motivate individual investors to vote on their behalf? Well thought-out communication and educational campaigns intended to call shareholders to action will help.
This matter is certainly crucial to the future of companies because when an individual investors votes are not returned, their voices are lost and other people are heard in their spot.
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