Confirmations for proxy voting are the missing pieces of the U.S. proxy system despite all the great strides the industry has made in automation. I could hear the frustration in the voice of Janice Hester-Amey, portfolio manager for the corporate governance group of the California State Teachers’ Retirement System (CalSTRS), the subject of a recent FTF News feature.”In every other aspect of investment when there is a trade, you get a confirmation back,” says Hester-Amey. “This is one of the only transactions where you don’t. … At this point, we can execute our vote and send it through the system but we don’t have any way of knowing whether or not the vote actually reached the company and whether it was cast the way that we sent it.” Hester-Amey adds that CalSTRS does get confirmations when it uses Broadridge Financial Solutions as the tabulator.
The Securities and Exchange Commission (SEC) touched on the confirmation problem last year in a concept release on the plumbing issues of the proxy voting infrastructure in the US. Since the concept release, Hester-Amey took part in a working group of securities industry professionals that gathered this past August at the University of Delaware’s John L. Weinberg Center for Corporate Governance. The group focused on how end-to-end vote confirmation could be extended to all, including retail shareholders.
The group that met at the University of Delaware issued a report that recommends changes to the confirmation process such as having: all parties clarify their voting status within six business days of the record date; all shareholders get their votes in three days before the shareholders’ meeting to avoid the confusion caused by late votes; all tabulators tell vote-reporting entities the cause of vote report rejections the day after problems are discovered; and the proxy process make electronic proxy vote confirmations available on demand and via audits or other kinds of review.
Hester-Amey says she would be happy if Broadridge’s Proxy Edge or a system like it from another vendor emerges as the platform to provide all investors with end-to-end confirmations. The issue has led to many discussions within a CalSTRS steering committee.
“I’m not sure why the tabulators don’t want to give that confirmation back through Broadridge. But a number of them do not,” Hester-Amey says. “It is a little more work and that could be one reason. It may be that they view it as a competitive issue with Broadridge. Or it could be as simple as the companies not putting pressure on them to give the confirmation back to shareholders.” Broadridge officials say they agree with Hester-Amey’s assessment and declined to say anything further.
The industry will likely have to wait for the SEC, public companies and investors to put pressure on the tabulators and other providers to do a better job of closing the loop on proxy vote confirmations. This is one area where there is a quick fix to what should not have been a problem in the first place.
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