Get-out-the-vote efforts can work, officials say
Companies have an array of tools that can be successful in whipping up turnout for votes at their AGMs if needed, according to industry professionals, Ben Maiden reports for sister publication Corporate Secretary.
Retail investors continue to vote in small numbers – roughly 25 percent, according to some observers – and therefore have the potential for a sharp increase in turnout if a company is facing what it expects to be a close proxy vote.
Underlining this trend, an academic paper issued in May by Choonsik Lee of Quinnipiac University and Matthew Souther of the University of Missouri at Columbia – Department of Finance finds that notice-only delivery of proxy materials significantly reduces the voting response rate, primarily driven by the lower likelihood of a response from retail shareholders.
Getting out the retail vote is particularly useful because they have traditionally tended to give management greater levels of support than institutional investors and activists. Issuers have a number of means at their disposal to do so, professionals told attendees at the Shareholder Services Association’s (SSA) annual conference in Bonita Springs, Florida last week.
John Lopinto, manager of US issuer services at Mediant Communications, said companies are moving away from labeling the outside of proxy notice envelopes with ‘AGM information enclosed’ because people tend to put such letters directly in the trash. Companies might also offer incentives such as making a charitable donation on behalf of first-time voters, he added.
Fellow panelist Ron Schneider, director of corporate governance services at Donnelley Financial Solutions, said calling individuals – though potentially an annoyance to shareholders – is effective in generating greater participation.
Lopinto noted that one form of this approach involves sending prerecorded messages from CEOs. Doing so before proxy materials are sent out – telling investors to watch for the envelope and that their votes are important – can be very effective, he said. Indeed, fellow panelist John Siemann, senior vice president with DF King, told the audience the retail vote can be almost doubled if companies make an effort such as placing calls.
In the same discussion, Schneider noted the evolution proxies have undergone in recent years toward offering more context and visual content. Although many companies don’t want to take the lead on innovation in this area, they also don’t want to be seen as laggards, he said. Other drivers of change include new directors who have used different approaches at other companies or the experience of having bad proxy votes, Schneider added.
Despite the benefits of new-look proxies, however, they should not end up resembling comic books, he warned, adding that the best approach is to focus on content and telling a story about the company. Institutional investors may not know the issuer’s latest strategy, so having a more robust cover or CEO letter to explain what the company is doing – and why – is important, Schneider said.