Watson and Stockperks like this idea. She explains that today’s
retail shareholders are “open to more information, but you need to be where the retail shareholders are.” In other words, interact with these shareholders on the platforms they frequent. If we are now meeting the investor where they are, then would more frequent engagement be the answer to getting the retail shareholder set to actively engage in Voting Choice and proxy voting? Watson believes BlackRock’s pilot could be the turning point to encourage issuers to embark upon year-round proxy engagement.
To Participate or Not Participate – That is the Question Will retail fund investors participate in the Voting Choice pilot? Lambert lauds all efforts toward retail engagement. “Te BlackRock pilot is an experiment with no downside as retail is universally favorable to management. However, I’m skeptical on whether retail will vote their say in funds any more than they do with their stocks. In fact, I expect it will be much less because there’s little affinity to a fund portfolio versus an individual company or stock.” Coates agrees. “It is highly unlikely that most retail investors
will ever lean into votes at 4,000-plus companies every year,” he says. “But on specific issues, or at specific moments at specific companies, that could plausibly lead to different outcomes.” While retail investors tend to vote with management, Levin notes they can be “rationally apathetic. In other words, it doesn’t pay for them to get up to speed on all the issues relative to what their vote adds to the process.” While Levin believes that “most people have better things to do than research two shares of Disney,” for those issues they do align with, such as the recent Starbucks labor relations issues, retail investors who are also consumers could show up to vote. Goldstein likens the process and uptake by retail to the politi-
cal system. “Just as we observe in political elections, where voter turnout varies depending on the issues and candidates that align with their personal beliefs, I expect retail investors’ participation in proxy voting to be influenced by the relevance of ballot issues,” he says. What will those issues be? Only time will tell, but Watson be-
lieves that we could see retail investor votes in areas that they are passionate about, such as “ESG, save the trees, clean the water, or placing more women directors on boards.” Watson argues that while a single retail investor may not be able to influence the vote, if you were to aggregate the retail shareholder base, 2-3% held by retail investors could be thought of as a 3% institutional holding. “As a collective power, they have more of a voice and retail can be very vocal and loud!”
niri.org/ irupdate
Yet is the purpose of the Voting Choice pilot really about retail
having a significant influence on the voting results or rather is it about “ensuring that retail investors are given the opportunity to participate and vote?” Gurrieri asks. With six different policies to use for voting, the voting block of eligible IVV shareholders may well be divided when it comes to voting on particular issues. Nonetheless, Conn emphasizes that “even modest participation may be seen as a success by funds and their fund investors given that the investor voting choice programs are in their early launch stages. We don’t expect an initial tidal wave of interest in the early phases of these voter choice initiatives. It appears that younger, more engaged investors are most interested in the advent of these technologies to assert their individual and collective influence. New technologies are delivering a dynamic that may yet see a broader range of fund investors taking advantage of these opportunities in the coming years.” Valerio believes where the most influence and participation
will be on votes that will be decided by a slim margin and “secur- ing support from smaller investor positions could ultimately carry the day for the proposal.” Tese could include proxy contests for board seats at shareholder meetings where proxy advisory firms issue adverse voting recommendations, such as recommending against Say on Pay. Regarding contested issues, Greene encourages companies to
respond to those issues on a case-by-case basis and “formulate an investor communication strategy that includes, at the very least, emails, mailings, microsites, and the like, to convey the company’s viewpoint.”
It’s a Marathon, Not a Sprint As a distance runner, I have a saying that I repeat to myself as I train for my races, and that’s simply ”one mile at a time.” In the case of this Voting Choice pilot, I think it’s fair to say that phrase is “one proxy season at a time.” Te impact of this effort will not be seen overnight. Even Black- Rock notes in the initial press release announcing the pilot that “through this IVV pilot, BlackRock will evaluate investor interest, proxy voting infrastructure, and overall user experience.” With that said, changes in the proxy voting system like these
should serve as an alert to issuers and fund managers to be pro- active. Te time is now to start planning for what the retail share- holder voice could mean for progressing corporate governance. Levin believes that “it’s going to take some time, but if BlackRock promotes this and makes it easy for shareholders to learn and become smart on the issues at hand” then we could see a shift in the future of proxy voting outcomes.
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