We’ve seen it too often. All across the country, high-stakes elections with razor-thin margins have been marred by outdated voting technologies, inefficient processes, and the threat of miscounted vote totals. But no, we’re not talking about the midterm elections (some of which are still undecided after two weeks). Or any political elections at all. We’re talking, instead, about the proxy voting process for public companies.
The SEC hosted three panels on proxy voting at its DC headquarters last Thursday, and a morning session on the nuts and bolts of the proxy process (“Proxy Voting Mechanics and Technology”) has generated significant attention. The 14 panelists started from the premise, acknowledged by all five SEC commissioners, that the time to update the proxy process has come. “There is broad agreement that the way investors vote in America needs to be fixed,” Commissioner Robert Jackson said in a statement.
Two initiatives drew vocal if not unanimous support, including the implementation of a “universal ballot.” The subject of a proposed SEC rule back in 2016, the universal ballot is an idea that institutional investors have been pushing. The universal ballot, which would list all board nominees, would replace the proxy cards currently in use: those issued by management (which list only management-approved nominees) and dissident groups (which list only their favored candidates). The universal ballot would thus allow shareholders to split their vote.
An even hotter topic was the creation of a system that allows for end-to-end vote confirmation. That is, a system that, through audits or otherwise, is capable of assuring shareholders that their votes have been counted. Panelists generally agreed that such a system would increase accuracy and lower the cost of the proxy process; they also generally agreed that blockchain technology could be the key to unlocking these benefits.
Beyond those general points, however, there’s plenty of room for dispute. And according to reports, there was a bit of finger pointing among various stakeholders on the panel. According to Barron’s, Ken Bertsch, the executive director of the Council of Institutional Investors, said that banks and brokers, which don’t foot the bill for the proxy process, “don’t have an interest in making this work.” Meanwhile, Broadridge Financial Solutions, which provides many issuers’ proxy solicitation communications, noted that it already provides voting confirmation to issuers that also make use of its tabulation abilities and criticized other tabulator services for not “cooperating” with its system. (Barron’s notes that it’s understandable that they may “not want to cooperate with a major rival.”)
With so many different interests at play, most coalesced around the idea that the SEC will have to take the lead on proposing new approaches to proxy voting. Listening to a healthy airing of views at last week’s roundtable would seem to be a good first step.