Several questions for those of you who own shares of stock:
When’s the last time you voted a proxy?
When’s the last time you opened a proxy?
Do you even know what a proxy is?
Don’t be embarrassed. Roughly 80% of individual investors–let’s call them share owners, because that’s what they are–don’t vote their proxies. This is one reason why CEO salaries are too high, boards of directors are complacent and executives fail to recognize that owners want companies to behave responsibly, as well as deliver returns.
A startup company called Moxy Vote aims to change that, by awakening share owners to their nascent power.
“It’s an interesting challenge–to put passion into proxy voting,” said Doug Gates, a Moxy Vote vice president, when we talked the other day.
Doug, 41, is one of three Gates brothers involved in the venture–his twin brothers Kevin and Rich are three years younger. The startup was hatched at a West Chester, Pa., investment company called TFS Capital, where Kevin and Rich work and which put $2 million into the business.
By enlisting the help of shareholder advocacy groups, the Moxy Vote founders think there’s an opportunity to organize individual share owners so that their voices can be heard in the boardroom. About 30% of shares in public companies are owned by individuals, as opposed to institutions like mutual funds, pension funds and insurance companies (most of which, of course, represent the savings of individuals).
Interestingly, Moxy Vote already has had some success. Shareholders of a small tech firm called On2 Technologies, which is being sold to Google, organized Moxy Vote to oppose the deal, which valued On2’s shares at 60 cents apiece. In December, Moxy Vote said on its blog that it had voted about 11.5% of the shares outstanding. This month, Google sweetened the deal under pressure, raising the price from 60 to 75 cents a share, from a total of $106.5 million to $133 million. Whether Moxy Vote made a difference (or even how the shares were voted) is hard to know, but surely the fact that shareholders got organized collectively didn’t hurt.
Here’s how Moxy Vote works. It formed relationships with about 20 shareholder advocacy groups, including unions like the Teamsters and Change to Win, nonprofits like the Humane Society of the United States and the Investor Environmental Health Network, foundations, socially-responsible investors and religious groups including the Unitarian Universalist Association of Congregations and the Sisters of Mercy Investment Program.
What these organizations have in common is that they use the power of shareholder resolutions (virtually all of which are advisory, by the way) to get corporations to change. Their issues include executive pay, climate change, human rights, diversity, animal welfare, toxic chemicals and so forth. They intend to use the site to recruit support.
As Michael Passoff, associate director of an advocacy group called As You Sow, put it by email:
While shareholders are technically the owners of a company, their voice is almost completely ignored. CEO’s regularly say that are doing this or that for the good of the shareholders, but as the latest financial crisis shows, many companies engage in risky business practices and the CEO’s still walk away with huge benefits even if they fail miserably at their jobs and destroy shareholder value. We believe in empowering shareholders to hold corporations accountable.
By email, Stu Dalheim, director of shareholder advocacy at Calvert Investments, told me:
Our sense is that too many investors do not vote their proxies because they do not have the time to think through all of the issues. Moxy Vote can help facilitate participation in corporate governance or shareholder democracy by giving individuals the information and tools they need to exercise their shareholder rights
Susan Morgan, co-founder of Investors Against Genocide, which is also working with Moxy Vote, said:
Over the past two years our shareholder proposal on genocide-free investing has been on the proxy ballots at the largest U.S. mutual fund companies including Fidelity, Vanguard, and American Funds. We have found that most shareholders throw away their ballots without realizing that they have an opportunity to vote on an issue of great social importance. We hope that through Moxy Vote and other related efforts, mutual fund shareholders will become more engaged in the voting process and realize that they can be a powerful voice for social change.
Moxy Vote itself doesn’t take sides on shareholder controversies. In fact, it’s hoping to enlist advocates on both sides–say, an animal rights group and a meat company. To make money, Moxy Vote may charge companies to be part of the site, or sell ads.
Doug Gates explained:
It was very much a conscious decision to stay out of the fray. We thought it would be more interesting, and more fun to build an open platform, and more successful in the long run.
Can apathetic share owners be awakened? Moxy Vote isn’t alone in trying. A nonprofit called ShareOwners.org (where my friend Nell Minow chairs the advisory committee) promotes better corporate governance and shareholder activism (“Rein in Wall Street bonuses and CEO pay abuses!”). A website called TransparentDemocracy.org invites people to learn more about political and corporate elections. Social media tools like Ning and Facebook make it easier than ever to organize like-minded folk.
In light of the fact that many people can’t be bother to vote for their president or Congress, it won’t be easy to induce them to vote as share owners. But in the wake of the financial crisis, when boards of directors performed horrible and the rest of us paid for it, this seems like the right time to try.