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To vote or not to vote?

Marketplace Staff Nov 2, 2007

To vote or not to vote?

Marketplace Staff Nov 2, 2007


Tess Vigeland: If you’ve ever been on a long trip, you can probably relate to our reporter Janet Babin. She just returned home to North Carolina after working two months at our studios here in Los Angeles and she has a tip for all of us:

Janet Babin: If you go away for a significant period, I would suggest having your mail forwarded or stopped, because I didn’t. And when I got home, my mailbox was stuffed to the brim. I could barely get the thing open, let alone see what was inside.

Among the junk mail and bills were several urgent letters from her Fidelity Investments Index Fund. Janet picks up the story from there.

Babin: The Fidelity envelopes were printed in thick black lettering. Please, open immediately — exclamation point!

At first I panicked: maybe my teeny tiny nest egg was in trouble.

I opened up the letters and inside were proxy cards — for shareholders not attending the annual meeting in Boston.

Oh, so the company just wants me to vote for the Board of Trustees. Let me see, there’s 11 names on the back of the card.

But I don’t have a clue who these potential trustees are. And I’ve got a pile of unopened mail here…

I asked around at work. My colleague Susan Davis just got a bunch of proxy cards too. And unlike me, she knew just what to do with them:

Susan Davis: I’m a working mother with two children and I sort of feel I can only contain so much information in my head and keep track of so much information and those proxy cards? Right in the trash.

But even Susan had second thoughts:

Davis: What happens if you don’t fill them out….does anybody know?

Jennifer Conrad: The short answer is nothing.

That’s professor Jennifer Conrad with the University of North Carolina business school. She explains that proxies are a way for shareholders who don’t attend the company meetings to vote their shares on whatever items happen to be on the agenda. Things like:

Conrad: The approval of the company’s auditor, possibly issues related to executive compensation. Sometimes issues related to big events, like merger proposals.

Some of the stuff is more than routine housekeeping, so it could deeply affect the value of the stock. That’s something I knew Roger Pyle would care about. He’s a member of my local investment club. He’s got individual shares in more than 50 companies. That’s a lot of proxy statements.

But he votes every one.

Roger Pyle: I vote on principle, and I feel like my few shares may sometime down the road make a difference.

Roger began to pay closer attention to the cards back in 2001, the same year a Texas-based energy powerhouse, went bust.

Pyle: You may remember the Enron debacle…

Babin: Oh yeah, I remember.

Pyle: …and I had some investments in that company and lost it along with everybody else, and noticed that if I’d have looked harder, I might have sold the company sooner.

While small investors like us can’t compete with pension funds and other large voting blocks, we’re making inroads.

Shareholder activism is up. Especially against CEO compensation.

But when it comes to say, voting for a corporate board, it seems like all I can do is rubber stamp the candidates pre-selected by Fidelity.

I got to be honest, there’s not much incentive for me to vote, and obviously my fellow investors agree, because Fidelity had to postpone its shareholder meeting.

Some say companies should make it more worth our while by letting us vote against board members who seem to be asleep at the switch.

That’s an idea backed by Kurt Schacht of The CFA Institute Centre for Financial Market Integrity. He says that way:

Kurt Schacht: The shareholder is in the position of voting for or against the director and a director is required to get a majority of the votes in favor of their election in order to serve as a director.

The SEC is considering a proposal that would give larger shareholders more of a say. They’d be able to put their own picks for the corporate board on the ballot.

Meanwhile, my Fidelity proxy statements? Still right on top of that huge pile of mail.

In Durham, North Carolina, I’m Janet Babin for Marketplace Money.

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