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What To Do With Investment Proxy Votes

You know those annoying communications from your investment portfolio alerting you to a shareholder vote? Those communications are proxy voting opportunities, and this post will help you understand what to do with them.


As a shareholder of a stock, mutual fund, or exchange traded fund (ETF), the SEC grants you a legal right to participate in the corporation's voting process.

If you own an individual stock, like Apple for example, your shares grant you a voting privilege on issues such as corporate sustainability considerations, a merger, or a proposed change in operations.

You also receive proxy voting notifications if you own funds. Same concept, but here, the fund will usually be voting on issues such as amending the investment objective or adjusting the what parts of the market the fund concentrates on.

In either shareholder scenario, you're not going to hop on a plane to corporate headquarters, which is the whole point of the proxy vote. It allows you to take part in this process without actually showing up in person. Most often, the proxy vote notification directs you to a website to cast your vote. If the company is old school, you receive a paper ballot.


Proxy voting is important the same way voting in a democracy is important. Don't like an outcome? Better not complain if you didn't cast your ballot!

Unlike the political process, corporate voting is based on the number of shares you own. Within large publicly traded companies, shareholders can influence corporate policy by owning a large number of shares. More shares equals more votes.

However, if you own shares of a fund that doesn't have a massive amount of assets under management, your vote carries a greater weight relative to the amount of other outstanding shares. Or, you could be Mark Zuckerberg and own special shares of your own stock granting you a vice like grip on ownership. If you're currently pissed off at Facebook, read THIS ARTICLE for further



Energy, climate change, water conservation, human rights, worker & product safety, and labor equality are just some of the factors that a corporation has varying degrees of control over. When an investor wants to influence corporate change regarding these types of issues, they initiate a shareholder resolution. A shareholder resolution is a public recommendation to the board of directors that specific action should be taken to achieve a desired result. This process is referred to as shareholder advocacy.

Most shareholder resolutions end up with less than 25% of the vote. But surprisingly, even a small number of unhappy shareholders combined with social media pressure can damage a company's reputation. According to Green America (of which my advisory practice is a member), negative publicity, consumer boycotts, and the loss of investor confidence can all lead to revenue loss, something most publicly traded corporations care a great deal about.


One type of positive corporate governance is the separation of CEO from board director. It's a check and balance mechanic, the same as what's supposed to happen in our government. Unlike most developed nations, the United States has shown a historical stubbornness towards this division of power. In 2005, only 29% of S&P 500 companies had separated the CEO from the board director*.

That's changing as a result of shareholder advocacy. Today, 48% of the companies in the S&P 500 have separated the CEO from the board director*. There's still a ways to go, but it's improvement.

The benefits of separation are 1. it keeps executive compensation in check, including the CEO, 2. it helps the keep corporate mandates on track, and 3. it allows for independent auditing of the board without interference from the CEO.


If I owned individual stocks (I don't, so this is purely a hypothetical), I would probably vote. Consider the Facebook example where Zuckerberg himself controls what the company does based on his special stock ownership. That kind of thing irritates me. If I can have my say, you bet I will!

I derive value from the feeling of participating, the process, and the satisfaction of voting. It makes me feel like a productive member of society.

Since I only own funds, most of the voting material I receive doesn't involve compelling or controversial material like sustainability issues or shareholder equity. It's usually pretty mundane stuff.

However, I always read the introduction to understand what's up for a vote at my fund. If it's something I can't possibly understand like should the fund approve Michael Gordon or Harold Hood for the vacant position on the board of directors, I don't even bother. I can't possibly know Michael from Harold since individuals at this level aren't well known commodities.

However, if the fund proposes something like changing the investment philosophy or advocating for more advanced stock selection protocols, I read on. If I feel like I can make an informed decision based on the information presented, I vote.

I recognize that often it's too hard to conduct the research to make an informed decision. Since you already have no time left in the day by the time to get to the mail, burning time researching a proxy vote is probably not going to win over crashing in front of the tv. I don't blame you.

However, I encourage you to at least read the intros when proxy votes come in the mail. Every once in a while, a certain issue just might catch your attention. If it's something you care about, take 2 minutes to cast your vote. You just might become part of the movement for positive change benefitting society and the planet.

That's worth voting for.

* Shareholder Resolutions, USSIF, The Forum for Sustainable and Responsible Investment.


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