Shareholders in publicly traded companies are entitled to vote their shares on items that are presented for a vote, whether by management or by other shareholders, at the corporation’s annual general meeting. In the United States, the agenda for the meeting and related materials that is mailed to investors ahead of the annual meeting is called a “proxy statement,” leading to the term “proxy voting.” Shareholders may vote, either in person at the company's annual general meeting, or more commonly, by mail or online.
Services to Assist with Proxy Voting Decisions
Institutional investors can turn to a number of outside firms for assistance in digesting and analyzing the often dense and complicated questions that appear in company proxy statements before casting their shares. In the United States, the major proxy advisory firms are ISS (a division of MSCI) and Glass Lewis. They generally issue vote recommendations a few weeks before each US company’s annual meeting on the proposals submitted by management and also, if any, by shareholders. They will also execute votes on behalf of asset owners or their investment managers in line with the client’s guidelines.
Institutional investors can avail themselves of other resources for background and better understanding on the environmental, social and certain governance issues they will see during the annual meeting season. The Interfaith Center on Corporate Responsibility (ICCR) publishes, usually in January, a compilation of the shareholder resolutions its members are filing for that calendar year. As You Sow Foundation issues a proxy season preview early in the calendar year highlighting the key environmental and social issues that will be raised in companies’ proxy statements. The preview is publicly available on the As You Sow Proxy Preview website. Sustainable Investments Institute (Si2) provides proxy-related issue briefing papers and company-specific analyses as a subscription service for institutional investors, particularly university and college endowments.
Abstaining from the Vote
If shareholders do not vote their proxies or leave proxy items unmarked, their unmarked items are automatically cast with management's viewpoint. Abstentions are not cast in management's favor.
Proxy Votes with Mutual Funds
If you are an investor in a mutual fund or other investment vehicle that does not allow you to vote your proxies directly, it is a good idea to find out how the fund's proxies will be voted on your behalf. Institutions with voting guidelines help investors discern the fund's position on key issues of corporate governance and social responsibility.
In addition, funds that invest in stocks are required to provide a record of how they voted, called an “N-PX” report, under rules issued by the SEC. The report will list each resolution and whether it was proposed by the company management or by shareholders, how the fund voted (“for,” “against” or “abstain”) and whether that vote was “for” or “against” the company’s recommendation. N-PX reports are lengthy, but you can search by key words or the names of companies in which you are particularly interested. The proxy voting page of US SIF’s Mutual Fund Performance Chart presents the links to the voting guidelines and the proxy voting records of the mutual funds offered by US SIF members.
To learn more about shareholder resolutions, please click here.