Proxy voting: owning the firm

This is a very busy time of year for some, and not just because we’re close to the U.S. federal tax deadline.  Over the past three weeks or so, I’ve received at least 15 information packets through the mail from various firms.  The packets typically include an annual report, a 10-K SEC filing, and a card for voting the shares I hold in the firm.  On top of the mailed packets are the electronic proxies.  Because of the way my investments are structured, some firms send me multiple copies of material – always with a request to complete my proxy.


Recently the way voting is handled has changed, so there’s a very good chance that, if you have U.S. investments, you are receiving more of these proxies than before.  The easy route is to locate a large File 13 and dispose of them.  The easy route gives you some of your time back, and you don’t have to dig through pages and pages of information.

The more difficult route – and the route that I take – is to review each packet of information, take the time to learn (or re-learn) about the firm and directors, and vote the decisions that you believe deliver the greatest value to you.  I encourage you to follow the more difficult route.  It is more rewarding in many ways.

First, you learn about what’s happening with your investment beyond a simple star rating or advisor recommendation.  Many of the firms that have delivered negative surprises in earnings, financials, or dividend changes could have been predicted from a review of the 10-K and the proxy statement.  Instead of consuming breathless reporting about the latest change in the Dow (which you can’t buy anyway), consume information about the investments you’ve actually purchased.

Second, it’s enlightening to see who is serving on the board of directors, how long each director has served, and what other individual interests the board has.  One particular multi-national corporation (MNC) has delivered significant change to its board over the past decade, and the changes have been far from positive.  Instead of focusing on the bottom line as in the past, the firm has become distracted at best and slow to respond to changing market conditions.  The results so far have been a slashed dividend, imprudent moves into industries in which it doesn’t have the scale to compete, and the selling of businesses that are closely aligned with the firm’s brand identity.

Third is that you are able to participate in the “wisdom of the crowds.”  When you make your voice heard, you add to the collective intelligence of the firm in which you’re invested.  If a shareholder proposal makes sense, vote for it within the context of your own interests.  If it doesn’t, then vote against it in that same context.I’ll close with a point that encompasses all of the others:  you have skin in the game, and you’re making more than an investment.  You own a piece of that firm, in much the same way you own a home, a car, or a nice watch.  Being an active investor is a way to take care of what you own, lest someone reach into your pocket and take your wealth away.

So do more than make an investment.  Be an owner.  Act and think like an owner that wants to grow the value of a possession.  You will help yourself – and those around you as well.

Finally, if you have a chance, go to at least one annual meeting of shareholders a year.  You’re entitled to be there, and the atmosphere of most is rich and exciting.  You can stand up and address the CEO directly with questions that are important to you.

Happy voting,

Bryan