Retail Shareholder Proxy Voting in Decline, but Still Important
According to Broadridge’s Proxy Pulse for 2020 US retail investors owned circa 29% of shares outstanding and voted proxies on 28% of their shares, which was significantly lower than the 92% voting rate across the institutional shareholder base. Ian Robertson in his 2018 analysis of retail shareholders and proxy voting noted that a U.S. Securities and Exchange Commission study in 1976 showed almost 70% of retail shareholders always voted, and an additional 23% sometimes voted their proxies; significantly higher engagement than seen in Broadridge’s analysis. Robertson presents several arguments for how and why retail investors have disconnected from the governing aspects of their investments; however, the concentration of proxy power with the passive managers and increasing activism, should lead regulators and corporate issuers to assess how to engage retail investors on proxy issues.
Regulatory and Systemic Changes Influenced Voting Decline
Several historical studies suggest that retail investors receiving electronic proxies or Notice and Access proxies do not vote, which may explain much of the decline. Robinhood’s acquisition of Say seems to challenge the historical data and behavioral studies. Perhaps the older retail investors simply liked their paper and with a new generation of retail investors the trend will reverse. Other studies suggest that the voting process for retail investors inhibits voting. Brokers and overseers of the proxy plumbing need easier and more intuitive ways to engage, inform and empower retail investors to vote.
Corporate Issuers Should be Motivated to Engage Retail Shareholders
As noted above, corporate issuers facing an institutional voting block and increasing activism have an incentive to profile their retail shareholders to understand their views and likelihood to vote. One approach is to engage retail investors on the issues they consider most important and highlighting proxy issues most aligned to these interests. Connecting such analysis to a centralized and standardized proxy viewing and voting platform would facilitate shareholder engagement. Reducing the time burden on shareholders to find and research the issues most aligned with their interest should increase voting activity. Finally, corporate issuers will have a more direct and better understanding of their retail shareholders interests versus intuiting this information from third-party, largely institutionally-focused service providers.
