Groups press for pro-retail shareholder voter reform

Industry and investment groups this week banded together to launch an education and advocacy campaign aimed at boosting retail investor involvement in corporate governance, in a shot across the bows of institutional investors that are increasingly pursuing ESG-based agendas.

The new campaign – the Main Street Investors Coalition – notes that shareholder proposals are increasingly focused on social or political issues, but that ‘unfortunately, the vast majority of retail investors have no ability to influence what’s being done supposedly on their behalf – or even know that it is happening.’

The coalition comprises the American Council for Capital Formation (ACCF), National Association of Manufacturers (NAM), Equity Dealers of America, Savings & Retirement Foundation and Small Business & Entrepreneurship Council, and expects to add further organizations, according to an announcement on its formation.

George David Banks, executive vice president of the ACCF, will be running the coalition on a day-to-day basis. He most recently served in the White House as a special assistant to the current administration on the National Economic Council and National Security Council. His career also includes serving with the State Department and Central Intelligence Agency.

‘The rise in low-fee passive investing has been a good thing for retail investors,’ Banks says in a statement. ‘But as the size and influence of these massive institutional holders has grown, so too has their ability to drown out the voices and interests of Main Street investors who, despite controlling the single largest pool of equity capital in the world, have no ability to influence the decisions these funds make on their behalf, with their money.’

Retail investors, by investing through vehicles such as 401(k)s and mutual, index and exchange-traded funds, have ‘lost the ability to exercise any meaningful influence or control over the way proxies act as stewards and managers of their money,’ the coalition states.

It adds that its four key priorities for the coming months are:

• Demanding that fund managers focus on maximizing performance – ‘not playing politics with other people’s money’
• Ensuring retail investors who own passive funds through 401(k)s have a say in how their shares are voted
• Forcing proxy advisory firms to be ‘more transparent about potential conflicts of interest’
• Insisting public pension funds meet the same regulatory and reporting standards as private pension funds.

‘When financial industry players push agendas that divert time, attention and resources toward their pet causes, it means less can be invested to pursue the growth Main Street investors deserve. It’s time someone stood up for the financial security of everyday, hardworking Americans,’ says Christopher Netram, vice president of tax and domestic economic policy at the NAM, in a statement.

Retail investors continue to vote in small numbers – roughly 25 percent, according to some estimates – and therefore have the potential for a sharp increase in turnout if a company is facing what it expects to be a close proxy vote. Getting out the retail vote is particularly useful because they have traditionally tended to give management greater levels of support than institutional investors and activists.