SEC Should Simplify and Streamline Proxy Voting to Encourage More Investor Participation Via Emerging Online Platforms

Oct 25, 2010, 10:17 ET from, Washington, D.C.

WASHINGTON, Oct. 25 /PRNewswire-USNewswire/ -- The U.S. Securities and Exchange Commission (SEC) should take advantage of its current review of the proxy voting system to dramatically simplify the process, improve information provided to investors, and spur wider retail investor participation through the encouragement of independent Web-based voting platforms, according to comments filed by the Education Network (, a nonprofit grassroots organization devoted to educating investors and encouraging them to act more like owners.

In its formal comments supplied in response to S7-14-10 SEC Concept Release on the U.S. Proxy System, Executive Director Tracy Stewart urged the SEC:

  • Assist ordinary shareowners in getting access to information and automated voting platforms. The comment letter states:  "Voting is the crux of communication between investors and the board. Investors are responsible to exercise their voting rights, but as a practical matter, they require access to quality information, the ability to share resources with other investors and institutions, and access to quality vote platforms with automation and other technologies that eliminate the obstacles to voting. Change the rules so ordinary shareowners have these tools at their disposal. For the most part, we're still voting like its 1985, before the communication and technological improvements of the internet and the governance reform movement."
  • Encourage development of voting platforms that include small shareowners by including a reasonable per-ballot fee in the proxy delivery fees paid by the issuer. The comment letter states:  "There are technological solutions for proxy distribution but little that adds value to the actual act of proxy voting. Third-party voting platforms can add value by automating the vote process and increasing the information and communication avenues for individual shareowners, but they must be free to the user to have an impact. Per-ballot fees will increase competition of providers in this space and enhance the quality of the platforms. This will encourage voting among average shareowners, and their participation will benefit all investors."
  • Streamline the communication process. The comment letter states:  "The current system increases complexity, adds unnecessary cost and does not serve the interest of shareowners. Allow competition to determine proxy distribution fees, so that shareowners can get the most value from this service."
  • Introduce data tagging for proxy and N-PX filings. Noting that this approach is recommended by the SEC's own Investor Advisory Committee, the comment letter states:  "This will increase the quality and accuracy of proxy information that reaches owners via proxy advisory firms, as well as to enhance the value of N-PX fund filings for investors."  

In the comment letter, Stewart notes:  "The more we unravel the overwhelming complexity in the ownership structure, the better it is for owners to have a clear idea of their holdings and to enable tracking or auditing of their votes."

Stewart also points out:  "The Commission should sanction the ability of retail shareowners to direct their proxy forms to third-party platforms, clarify the application of the proxy solicitation rules to intermediary participation, and encourage development of third-party voting platforms that include ordinary shareowners by including a reasonable, per-ballot fee in the proxy delivery fees paid by the issuer. With regard to owner-to-owner communication that may occur on these voting or other platforms, the rules that restrict electronic shareowner forums should be drastically shortened or eliminated."

"The biggest hindrances to shareowner voting now are paucity of reliable information outside of the proxy statement, such as from other owners and institutions, and lack of automated voting platforms for retail owners. Third-party platforms funded by issuer-paid ballot fees would allow retail owners to create customized voting policies, set their votes according to specific company information within the proxy, or match ballots with other types of investors such as institutions or informed investors with whom they share sentiment, individually or in aggregate. Such an account-based automated system could provide users with a confirmation email of their established selections in advance of each meeting so that changes can be made prior to the vote deadline and also reaffirm the general settings the investor has made for future instructions."

"At least two entities have such retail voting platforms in development. There are economies of scale in developing these systems, and competition for fees will likely stoke innovation that will drive features and ease of use to attract retail investors.  The voting platforms will likely be offered in conjunction with existing information, communication and other services offered by entities such as ProxyDemocracy, Moxy Vote, or Proxy Governance. "

On the need for data-tagging of proxy-related materials, Stewart told the SEC:  "It will have a significant impact on the quality and breadth of information that reaches the average investor."

Stewart added:  "We have co-sponsored a report for three years on executive compensation voting practices among 25 large mutual funds, along with AFSCME and The Corporate Library, and the data in the most recent report was provided by ProxyDemocracy.   We know the difficulty that ProxyDemocracy faced in trying to assemble this data, beginning with the task of searching for and locating each specific fund filing within EDGAR, processing the N-PX files which appear in a number of different formats, and filtering the reports for similar proposals, a process complicated by differing numbering and naming conventions. The procedure requires a great deal of manual interfacing, and it is time consuming and may be prone to error.

"We know of no other publicly-available, in-depth reports on U.S. mutual fund voting, and only a handful of other for-profit companies have ventured into business models that accommodate the information in the N-PX reports. We believe the information contained in these reports can have a dramatic impact on shareowner value if it is shaped into usable form, and we are willing to expand our efforts in this area beyond executive compensation and beyond the 25 firms covered, as investors deserve, if the Commission can help make this information more accessible and less costly to process."

The full text of the comment letter to the SEC is available online at


Launched in June 2009, ( is a nonprofit and nonpartisan organization that educates and organizes U.S. investors to support both short- and long-term financial market reforms.'s broad four-part agenda focuses on the need for stronger regulation (including a beefed-up SEC), increased accountability of boards/CEOs, improved financial transparency and protection of the legal rights of investors.  Also known as the "Shareowner Education Network," is a grassroots effort to galvanize individuals to act more like owners.   Our mission is to provide the tools and resources for shareholders to become informed about their investments, to exercise their ownership rights and to influence the policies of their financial advisors.

For more information about, please visit on the Web.

SOURCE, Washington, D.C.