A new report finds that the proxy voting system in the U.S. is too complex, and it calls for reforms to make voting more accurate and transparent.
The Securities Transfer Association (STA) released a report Tuesday that examines industry efforts to improve the proxy voting system in the U.S.It notes that an industry-led working group has helped develop new communications portals and share reconciliation procedures designed to improve the accuracy of shareholder votes. However, it also concludes that the system is still too complicated, and it suggests that more substantive reforms are necessary to make proxy voting more transparent and accurate.
“While progress has clearly been accomplished in providing investors with the ability to receive electronic confirmation that their votes were cast as directed, more work needs to be done,” the report says. “The end result of vote confirmation cannot be accomplished with complete accuracy until other proxy voting issues within the street name system are addressed.”
According to the report, the most important of issues involve reconciliation of the entitlement of each investor to vote a share position as of the record date. It says that reconciliation needs to occur at both the nominee level and at the beneficial owner level. And, it suggests that the proxy voting system would be improved “through reconciliation of the vote entitlement at the beneficial owner level before a proxy distribution is made. This reconciliation would determine eligible voters and share positions in a uniform manner for broker-dealers and banks holding street name shares.”
At the same time, the STA says that reconciliation at the nominee level needs equal attention “to ensure that all of a nominee’s shares entitled to be voted have been accounted for.”
The STA also says that it believes that as many processing tasks as possible should be standardized and automated, to limit the amount of manual processing required.
And, longer term, the report suggests that the U.S. Securities and Exchange Commission (SEC) should also move to “simplify the system by adopting substantive reforms to make proxy voting more transparent and to ensure a higher level of accuracy in the vote count.”
Canadian regulators have been grappling with many of these same issues. Earlier this year, the Canadian Securities Administrators (CSA) held a roundtable to examine issues such as improving vote reconciliation, and adopting end-to-end vote confirmation. That session followed a consultation paper issued last year by the CSA on proxy voting issues in Canada.