Twitter, text messages, YouTube, and other technology transformed politics in 2008. This success raises a compelling question: Can the same technology awaken the more dormant world of corporate democracy? For decades, shareholders have abandoned their responsibility to use their votes to shape corporate behavior. But perhaps technology can revive democracy on Wall Street. Could shareholders, gathered by an emergency twitter message, soon converge on a shareholder meeting to demand a claw-back for ill-gotten bonuses? Could proxy voting in 2011 generate the same enthusiasm as actual voting did in 2008?
The importance of the issue cannot be overstated. Virtually every thoughtful discussion of corporate governance concludes that unless shareholders act like the true owners they are, all the proposed corporate reforms will fail. While there are some who claim shareholders are simply too ill-informed to participate meaningfully, this argument should carry no more weight in the corporate context than it does in the traditional political arena.
About 25 percent of shares are held by retail investors—owners like you and me, as opposed to mutual funds, pension funds, or hedge funds. This 25 percent block of votes presents a huge opportunity, because only about one-quarter of that block votes. In other words, 18 percent of all shareholders are simply sitting out. After the economic cataclysm of the past two years, one might think the opportunity to bring these new voters to the table—just as in the 2008 campaign, is real. How to do it is the issue.
Technology may be the answer. Several Web sites focused on corporate proxy voting are hoping to emulate the success of recent political campaigns.
Proxydemocracy.org is an information source that tries to help retail shareholders more effectively use their proxy voting power. It permits shareholders to track upcoming board resolutions and see how major institutional investors are planning to vote; it also permits owners of shares in mutual funds to see how those mutual funds have voted their proxies over time and permits an easy comparison with other mutual funds on a broad range of “shareholder activism.”
A shareholder interested in knowing more about the Jan. 13 annual meeting of Walgreen, the pharmacy company, for instance, could easily see that several institutional investors are opposing management on a number of significant issues, including ratifying the auditors and eliminating the requirement of a supermajority vote in certain contexts. Armed with this knowledge, retail investors might decide to investigate more, join forces with the opposition, or remain passive.
ProxyDemocracy is the corporate equivalent of knowing how major editorial boards judged a political candidate. Some of the institutional investors whose views are displayed—such as certain activist unions—may be aligned with individual shareholders, but ProxyDemocracy intends to be neutral in the information it provides.
Moxyvote.com, on the other hand, is a more overtly ideological site, providing its own list of shareholder advocates. It tries to direct shareholders to important ballot proposals at upcoming annual meetings. Shareowners.org is an advocacy site, designed to organize retail shareholders around corporate governance issues, rather than to focus on particular annual meetings.
Whether these new information portals will work remains to be seen. There are at least two critical hurdles that still have to be overcome: First, most shareholders don’t vote because they assume their votes don’t matter; shareholder votes are almost never close.
Second, there is no water cooler for corporate democracy. A presidential or mayoral race prompts conversations among friends and colleagues and generates daily press coverage. A corporate proxy vote doesn’t. We don’t all own the same shares, and even if we did, we probably wouldn’t talk about it.
Even so, bringing the technologies of the “new politics” to the corporate context will make information access easier and ultimately even permit direct shareholder-to-shareholder communication. In the long run, reinvigorating corporate democracy is almost as important as reinvigorating political democracy. Much as we may believe that a new regulatory regime will fix our corporate sector, the more important levers of influence will, and should, come from the activities of shareholders, aided by new technology.