Proxy voting - valuable, but value wasted

Share voting is rather central to the theory of shareholder democracy, and yet the evidence from annual meeting returns is often that little more than half the ballots are cast, at least among those widely distributed in the market. The reasons for this fact are many, ranging from legal and even illegal constraints on cross-border voting, to the awkwardness of the process itself. Most of all, though, there's a sense that voting shares is even less likely to influence the outcome than voting for your representative in Parliament. Institutional investors – the ones with any real clout, that is – are probably going to use face-to-face meetings with senior management to make their concerns known, rather than waiting until the annual meeting and then casting a vote for or against a particular director. According to a global survey of asset management firms by two German scholars, votes are still considerable valuable. They measured both attitudes and behaviour, using the gap between share prices of voting and non-voting shares as a proxy, and found that investors to put quite a large value on voting rights. Moreover, they detail what many have suspected: that the division of labour in asset management firms mean that the fund managers who buy and sell stock make voting decisions less than a third of the time. A majority uses a management process through proxy voting committees or decision of executive management of the firm. Their questionnaire didn't capture how often voting decisions are outsourced.

There's more detail, as well, on views concerning attitudes to corporate environmental, social and governance issues at the companies in which they invest.

Source document: The working paper "Corporate Governance: Ethical compliance in the asset management industry," by Alexander Bassen and Christine Zöllner, is a 53-page pdf file.