Proxy voting gives fund shareholders a say

As a shareholder, even if you cannot attend the meeting in person, you have the right to vote by proxy on major issues affecting the company’s finances.

Before the company’s or mutual fund’s annual general meeting, shareholders will receive a package of emails containing various documents reporting financial data and operating results, and announcing important issues-such as proposals for changes to the company’s shareholding structure or mergers and acquisitions.

These are all things that shareholders or unitholders, the true owners of companies or mutual funds, will vote on at the general meeting of shareholders. However, if shareholders are unable to attend the annual (or special) meeting, they can vote on the proposal through a proxy, which is one of the documents included in the pre-meeting mailing package.

Key points

  • Proxy voting is a voting by company shareholders who may not be able to attend the general meeting of shareholders or do not want to vote on a certain issue by a person or company representative
  • Before the company’s annual meeting, eligible shareholders may receive voting and proxy information before shareholders vote.
  • Investors can choose other people (such as members of the company’s management team) instead of attending the general meeting in person instead of attending the general meeting in person.

Purpose of proxy voting

Shareholder voting is the main method for shareholders to influence the operation of a company or mutual fund, corporate governance, and may not even be considered as the main means of social responsibility activities of financial consideration. Therefore, it is very important for shareholders to participate in voting and make decisions based on a full understanding of the information and legal documents provided to them.

At a general meeting of shareholders, investors who hold common stock (or mutual fund units) usually get one vote per share (or unit), unless they own stocks with additional voting terms. Shareholders who did not attend the meeting and did not use the proxy card with their signature were considered abstentions—they neither supported nor opposed any proposal made at the meeting.

But proxy voting allows shareholders to vote when they are unable to attend general meetings, so investors can actually own and vote on shares of companies and mutual funds that may be positioned and registered on a global scale.

In the Internet age, investors can not only buy and sell stocks online, but they can also vote on their power of attorney. The entire document delivery process can be electronically automated. The official documents are sent to shareholders in electronic form, who then log in to the system with a control number or personal identification number and vote for or against the proposed resolution.

Proxy voting guide

The Internet has also greatly assisted shareholders in researching their decisions. Many institutional investors now publish their voting decisions online before the meeting date, giving individual investors an opportunity to understand the position of large institutional shareholders on the issue. These same institutions can also provide extensive explanations for their decisions by publishing their “Proxy Voting Guidelines.” For example, organizations can vote on criteria such as long-term value, corporate responsibility, responsibility, and sustainability.

The most proactive institutional investors play a supporting role in holding directors accountable for resolutions made at important meetings. The agency will not only establish its model proxy voting guidelines, but if the initial decision is not clear, it will seek more information from the company itself. For example, the agency may contact management directly to discuss a specific proposal, suggest changes to the nature of the proposal, or, in extreme cases, urge the withdrawal of the entire proposal. This influence is usually only held by powerful institutional investors, making the agency’s role in the proxy voting process very valuable.

Innovation of proxy voting system

Over the years, following the well-known corporate scandals committed by the management and directors of many listed companies, more consideration has been given to modifying the proxy voting system-most importantly, allowing shareholders to introduce proxy resolutions. Today, any shareholder (or group of shareholders) who holds at least $2,000 or 1% of the company’s stock for at least one year can make a proposal. These proposals are often referred to as “direct agency visits,” and the most prominent focus is to allow shareholders to nominate candidates for directorship. On the one hand, this brings a new perspective to the board of directors; but on the other hand, lack of experience (and other factors) may cause shareholders to nominate directors who are truly unsuitable to serve as directors.

Bottom line

Proxy voting is usually the only way for investors to have a say in the business operations and social activities of their company or mutual fund. Shareholders do not need to attend important meetings in person, but of course they must work hard to read and understand legal resolutions and use all available resources to vote based on their best knowledge and information.

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