Client Question: Proxy Voting

May 16, 2024

In the past few weeks, I’ve gotten a few client questions about emails they’ve received from Charles Schwab, alerting them the “Vote Now” regarding an individual stock position held in their account. These diligent clients have asked what these emails are referring to and if there is anything they should do to address them. This is a great question and one I thought I would address this week

Shareholder Rights

As a shareholder in a public company, you have the right to vote on certain matters. These matters are dictated by the bylaws of the Corporation and may include unique items (such as mergers) or more routine items (such as accounting firm appointments, board of director appointments, and compensation packages). A Corporation is required to follow its own set of rules and subject these matters to a Shareholder Vote.

Proxy Statements

In order to complete this process, Corporations mail out details on the items up for vote via a Proxy Statement and include a Proxy ballot for shareholders to complete (nowadays much of this is done electronically). The term proxy is used as most Shareholders won’t attend the meeting in person to vote, and some won’t vote at all. The term “proxy” itself refers to “the authority to represent someone else, particularly in voting” – so in this case, it refers to the fact that Shareholders can submit their votes in advance on the various items and someone will cast their vote at the shareholder meeting.

In practice, the votes are tallied in advance of the meeting and if majorities are in place (taking into account any outstanding votes), the decisions on the matters are often announced right at the meetings.

Does Windermere vote proxies for its clients?

As a firm, we do not vote proxies for our clients. We have stated in our advisory agreement that voting power remains in the hands of our end clients.

Should you vote?

This is entirely up to you. Given the percentage of shares most of our clients own in any given business, it is highly unlikely that their vote will carry the decision (proxy votes are usually dominated by large block shareholders like pension plans and mutual funds – many of whom hire consultants to research issues and advise them on votes). However, as in elections, every proxy vote does count. It’s really a matter of preference and personal desire to have your input be known and accounted for. Many of our clients will vote special items (like a merger) but defer to the larger blocks for more routine items. This is how I handle proxies for my own positions as well.

Hopefully the next time you receive a “vote now” email you will know how to proceed! Maybe give voting a try – always helps to learn more about the companies you own.

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