Votermedia Finance Blog

June 1, 2010

Ultimate Proxy Advisor Proposal – revised

Filed under: Uncategorized — Tags: , — Mark Latham @ 11:05 am

Thanks to comments from Jim McRitchie and John Richardson on the previous draft, I’ve revised it below to make it more attractive for advisors:

This shareowner proposal is an enhancement of my previous Proxy Advisor proposals, based on what we have learned from implementing this idea for the past four years at the University of British Columbia. The main idea is in section 3 of “Proxy Voting Brand Competition”, and the UBC implementations are described in “Global Voter Media Platform”, both at votermedia.org/publications. See also the current UBC ballot.

WHEREAS many shareowners lack the time and expertise to make the best voting decisions, yet prefer not to always follow directors’ recommendations;

WHEREAS shareowners could benefit from greater competition in the market for professional proxy voting advice;

THEREFORE BE IT RESOLVED that XYZ Corporation shareowners request the Board of Directors to hold a competition for proxy advisors giving public advice on the voting items in the proxy filing for next year’s XYZ annual general meeting, with the following features:

* The competition will be announced no more than six months after this year’s annual general meeting. To insulate advisor selection from influence by the Company’s management, any proxy advisory organization can enter by paying an entry fee of $10,000, and providing their name and website address. Each entry will be announced publicly, promptly after it is received.

* The competition will award a total prize pool equal to the sum of entry fees received plus $30,000 if there are three or more competitors. If there are two competitors, the total prize pool will be the sum of entry fees received plus $20,000.

* Prizes will be determined by shareowner vote on next year’s XYZ proxy. The proxy will show this question: “What percentage of the prize pool should we award to each of the following proxy advisors? (Your votes need not sum to 100%.)” Then the name and website address of each advisor entered will be listed in chronological order of entry, with the following voting choices for each advisor: 0%, 10%, 20%, 30%, 40%, 50% if there are three or more competitors; if there are fewer than three competitors, then the voting choices will be 0%, 20%, 40%, 60%, 80%, 100%.

* If there are two or more competitors, then a cutoff number of votes (i.e. shares voted) will be determined such that the sum of awards will be 100%, where each advisor is awarded the highest percentage such that the sum of its votes for that percentage or higher is greater than the cutoff.

* If there is only one advisor entered, then that advisor will receive $10,000 (i.e. their entry fee), plus the median voted percentage times $10,000.

* The XYZ filing that reports the final voting results will show the total number of shares voted for each percentage level, for each advisor.

* It is expected that each proxy advisor will publish advice on its website regarding next year’s XYZ proxy, but there will be no formal requirement to do so. The incentive to win shareowner voting support and to maintain the advisor’s reputation will be considered sufficient motivation for giving quality advice.

(Further information at http://votermedia.org/publications.)

I have no immediate plans to submit this proposal, but I think it would greatly benefit shareowners and improve corporate governance. I recommend anyone to submit it. Feel free to change it as you wish.

Your comments welcomed!

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3 Comments

  1. FAQ: Frequently Asked Questions & answers re this proposal:

    1. Is there a conflict of interest when the corporation pays for voting advice going to investors?
    — No. Investors own the corporation, so if the corporation pays then that means investors are paying. There would only be a conflict if corporate management controls the payments, the way they control most corporate payments. But this proposal is specifically designed to let investors control the payments.

    2. Different voting advice may be appropriate for different investors. Is that a problem for this proposal?
    — No. An advisor competing for investor-directed funding can publish different advice for different classes of investors that they specify, with links on their website for each class.

    3. Doesn’t this make voting more complex, thus making it harder for retail investors to vote?
    — This proposal would make retail voting simpler. The difficulty of voting is not measured by the number of voting items. This proposal would make professional voting advice available to us retail investors. That would simplify our voting decisions. We could choose which advisor to trust and to fund, based on reputation, then follow their advice on all issues.

    Comment by Mark Latham — June 9, 2010 @ 8:50 am

  2. […] corporate funds. There are several possible ways of arranging this. One example is Mark Latham’s Ultimate Proxy Advisor Proposal (June 1, […]

    Pingback by An Open Proposal for Client Directed Voting — The Harvard Law School Forum on Corporate Governance and Financial Regulation — July 14, 2010 @ 6:09 am

  3. […] a whole new template for voting advice? The best alternative I have seen is Mark Latham’s Ultimate Proxy Advisor Proposal – Revised, where a company would hold a competition for proxy advisors giving public advice on the voting […]

    Pingback by SVNACD: Red Flags of an Ethical Collapse & Alternative Proxy Voting Advice to Stem Dual Class IPOs | The Shareholder Activist — March 15, 2013 @ 7:14 am


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