In 2008’s Swing Vote, Kevin Costner played a mild-mannered New Mexican slacker dad upon whose shoulders an entire presidential election came to rest. As the 2012 election cycle plays out, we’ll be hearing plenty of sound bites about the power of each citizen’s vote.
Although your vote may not tip the entire presidential election, you could certainly have an impact on votes conducted within your investment club. And while your club may never deal with the complexities rivaling those of the Electoral College system or a state of Florida recount, there can be times when voting is more complicated than a simple yay/ nay voice vote.
First, all investment clubs should support voting by the capital account of the partners. This allows the members who own the greatest amount of the club — and, presumably, the members who’ve been partners the longest and are the most experienced — to have a greater say in club business.
The alternative — one person, one vote — simply isn’t fair for members who have the most at stake in the club.
After all, public companies don’t operate on the “one shareholder, one vote” principle. They provide one vote per common share. If you want more say in the company’s operations, pony up the bucks to buy more of its shares.
As this method can be a bit unwieldy in practice, I recommend that clubs adopt a provision to allow for one vote per member by default on routine business, but to allow for a vote by capital account if called by any member prior to the tabulation of ballots. This protects the largest owners of the club while making it easy for the secretary to determine with ease whether a motion passes or not.
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