What can we learn from looking at the voting trends of institutional shareholders versus retail shareholders? ProxyPulse looks at this issue in the third edition of their proxy season recap.
Clarifying the Terms:
In the case of these findings, the term “institutions” refers to mutual funds, public and private pension funds, hedge funds, investment managers, managed accounts, and vote agents. “Retail” refers to individuals whose shares are held beneficially in brokerage accounts. Positive voting habits– especially on director support and say on pay– is one of many positive shareholder behaviors that Shareholder Service Solutions refers to in their list (which you can read in full over here).
Ownership Vs. Voting:
According to ProxyPulse, institutional shareholders own 67% of street shares, versus retail shareholders, which own 33% (a 2% jump in institutional ownership from 2012). Retail shareholders were found to vote just 30% of their shares– a decrease of about 1% from 2012. What’s the cause of such low voter turnout? ProxyPulse sites “investor apathy”, among other potential factors. Institional shareholders, on the other hand, voted 90% of their shares.
Say On Pay:
ProxyPulse reports that “Say on pay proposals received slightly more favorable support this season than in 2012”. Retail and institutional support of say on pay was generally comparable. However, at companies with favorable voting below 50%, retail shareholders supported say on pay at higher rates than institutions at all large and mid cap companies. With small and micro cap companies, retail support was higher than institutional support at 97% of companies.
What We Can Learn:
ProxyPulse’s findings are accompanied by a list of 10 Questions Directors Should Ask, beginning with “What is the institutional and retail mix of our company’s share ownership.” Their series places an important emphasis on proactive planning– on company’s understanding their mix of shareholders and their needs, and considering them when making decisions. Retail shareholders can hugely impact voting, and must be reflected upon.