Are individual investors the Rodney Dangerfields of corporate governance? John Endean thinks so. The president of the American Business Conference says in a recent opinion piece in The Wall Street Journal that the little guys get no respect because it’s thought that the shares they own are too few and they’re too unwilling to make themselves heard in corporate elections.
The conference is a Washington, D.,C., based coalition of midsize growth companies.
But reports that find U.S. companies are largely institution-owned aren’t on target because they include shares held in brokerage accounts as institutional ownership. Endean points to a 2014 Proxy Pulse report from Broadridge and PricewaterhouseCoopers showing that individual investors hold 30 percent of corporate shares.
It’s just that individual investors don’t vote. Institutional investors vote 90 percent of their shares.
“The low level of individual voting has long worried the Securities and Exchange Commission,” Endean notes.
The SEC in 2010 “floated” the concept called Advance Voting Instructions (AVI), Endean writes. This would allow individual investors to register with their brokers prior voting preferences for every stock they own, which could be for or against corporate board recommendations, or in step with the recommendations of an outside group.
“No one expects the institutions to champion AVI or other reform to promote individual voting. But it is striking that the CEOs and boards of companies have not done much about it either,” he says. “Perhaps this will change once the size of the individual investor universe becomes clearer. Even an incremental increase in individual voting, through something like AVI, would have a real impact on say, director voting or pay issues. And it would be one corporate governance reform that CEOs and their boards could justly champion as an expansion of corporate democracy, leaving it to others to justify the suppression of the individual vote.”
Just don’t expect the Rodney Dangerfields among us to say take my portfolio — please.
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