Stepping up to the AGM

PROXY: With Q4 earnings season almost over, focus will shift to shareholder annual general meetings and ‘proxy voting’ season. This ramps up to a May peak and is one of the most important ways investors can influence how a company is run, from pay to policy and dividends. Retail investors now directly own an estimated 31% of US shares. But historically have been chronically under-represented as only 30% actually vote. This is starting to change as more brokers encourage participation. And fund companies now offer ‘pass-through’ voting that allows underlying investors to vote their holdings. All the industry big-3, Blackrock (NYSE:BLK), investor owned Vanguard, and State Street (NYSE:STT), that collectively vote 25% of US ballots now offer this.

TRENDS: The Annual General Meeting (AGM) is a formal meeting between a company’s shareholders and the board of directors who supervise the company on their behalf. The most famous is Berkshire Hathaway’s (BRK.b) ‘Woodstock for Capitalists’ in Omaha, set for May 4th this year. An AGM must be held annually and within six months of the end of the financial year. 2023 saw a five-year low degree of shareholder support for management proposals, reflecting depressed markets and an ESG backlash. 2024 is set to see 1) new cybersecurity disclosures, 2) lower bar to activists with growth of universal proxy regulations. 3) popularity of virtual AGM’s.

RETAIL: Retail investors punch below their rising weight. With only a slowly increasing 30% of eligible shares historically voted (see chart), even as it becomes easier. Versus a high 80%, though falling, of institutional investors who have a fiduciary duty to vote on behalf of holders. The ‘voting’ industry is a duopoly of advisory firms. Institutional Investor Services (ISS) which Deutsche Boerse (ETR:DB1Gn) (DB1.DE) paid $1.8 billion for 80% in 2021, and privately owned Glass, Lewis. Whilst proxy processing is dominated by Broadridge (BR), with a 80% share of the US market.