It’s always been a conundrum: can people vote out democracy? Should you force people to vote? Both have a certain logical inconsistency. In the corporate world, however, stringent efforts are being made to encourage voter participation, if not to insist on it.
In the UK, a new Corporate Stewardship Code has been published to replace the old Corporate Governance Code. Unlike the old code, which put the onus on companies to meet certain minimum corporate governance standards or explain publicly why they were failing to do so, the new code puts pressure on shareholders.
Of course, there are new requirements for companies as well: to have external reviews of boardroom procedures and regular elections for directors, for instance. But the overall goal of the seven principles of the code is to encourage more interaction between boards and shareholders, not least to reduce the chance of future financial crises. So the principles include guidelines requiring investors to monitor risky behavior by companies, for example, and to disclose how and why they have voted in specific cases. If they fail to comply with any of the guidelines, they must explain why.
The code breaks new ground in seeking greater scrutiny of corporate behavior by investors – and investors seem to be signing up with enthusiasm: nearly 70 so far, and counting. They’re not all UK institutions, either – they include CalPERS, BlackRock and AXA, among others – and there’s optimism the new code could start a global trend, with other countries launching similar initiatives.
Meanwhile, in the US, various organizations have been exhorting people to exercise their democratic right to send comments on proposed legislative changes to the SEC. Proxy plumbing changes – say on pay, notice and access, NOBOs/OBOs, and so on – will have a big impact on many companies.
Neil Stewart explains on our website what writing comment letters entails, and we also have a couple of examples of comment letters on this very issue, sent to the commission by Broadridge.
We’re all busy people and it may seem like an effort to register views in this way. But the problem is that, as with failing to vote in democratic national or local elections for government representatives, it’s difficult to complain afterwards if you don’t like the way things turn out.
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