Alexandra Higgins is a managing director at Okapi Partners providing strategic counsel to corporate clients and their advisers with a focus on governance and compensation issues, as well as other ESG concepts.
Higgins has more than 15 years of experience in corporate advisory and governance roles. Prior to joining Okapi Partners, she served as VP and Head of U.S. Partner Advisory Services at Institutional Shareholder Services Inc. (ISS) Corporate Solutions, where she managed advisory services for U.S. professional services firms on ISS policy, corporate governance issues, equity plan disclosure and shareholder activism.
Christopher P. Skroupa: A Cleary Gottlieb Steen & Hamilton LLP report from 2010 claimed that proxy voting by retail beneficiary owners was “low and declining.” In your opinion, do you believe this trend has continued?
Alexandra Higgins: Less than a third of retail shareholders vote in corporate elections. That figure hasn’t changed in a while, but we do see some areas that could increase interest and participation, particularly on social and diversity issues. As more ballot issues like say on pay and social issues like gun control, cybersecurity and environmental stewardship have become hot button issues, more retail shareholders can become energized to make their voices heard. We think retail shareholders will become an influential and decisive block for significant corporate elections.
Skroupa: Why is the imbalance of retail voters an issue that needs to be addressed?
Higgins: Retail shareholders need to aware that their votes matter and a healthy corporate democracy is one where everyone can participate and is energized to do so. The current system does little to encourage that participation and institutional investors dominate the outcome of proposals. That result may be fine when the institutional investors own almost all of the company, however, there are issues where these institutional investors may be divided and the retail vote could impact the outcome. This impact is especially true for proposals relating to say-on-pay and director elections. Proxy advisers like ISS and Glass Lewis require responsiveness and engagement with shareholders if vote support levels fall below 70% or 80% for say-on pay or director elections (for Glass Lewis), and will recommend against directors if this responsiveness isn’t disclosed in the company’s proxy materials for the next annual meeting. Moreover, retail votes can determine the outcome of a proxy contest, often deciding the composition of the board and the direction of a company.
Skroupa: What’s the solution? How do you get retail voters to vote more?
Higgins: We work on campaigns for companies and mutual funds where retail investors dominate the share registry yet are apathetic about voting. However, as a proxy solicitor who has also been involved in many proxy fights where the retail shareholder vote was significant, we know that retail shareholders can be interested in voting. In our experience, retail shareholders want to be involved in the companies they own when they understand that the matters are important but these holders also want the voting process to be much easier. Technological advances in voting are getting better and we work with our clients on myriad methods of outreach to shareholders. All participants within the corporate outreach and investor community should work together to make more information available about annual meetings, corporate governance and other issues. As ESG matters become more important in the boardroom, for example, we think retail shareholders’ interest in voting will naturally go up and voting levels will improve with better technology.
Alexandra Higgins will be speaking the Engagement and Communication conference on the The Ethical Shareholder Initiative: Creating a Longer-term Corporate Focus on June 13 in New York, NY.
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