Revolutionizing corporate governance: The case for a centralized proxy voting platform

By Jonathan Smalley, COO and Co-Founder, Proxymity

 

Proxy voting has long been a critical aspect of corporate governance, allowing shareholders to exercise their voting rights and influence important decisions. However, the current system in the United States is outdated and inefficient, involving multiple intermediaries that can create inefficiencies and errors in the voting process. This has led to calls for the adoption of a new system for proxy voting, such as the centralized platform offered by Proxymity (www.proxymity.io), which has been adopted and invested in by some of the largest banks in the world.

Academic research has shown that the current system for proxy voting in the US can be prone to errors and biases. For example, a study by the Harvard Law School Forum on Corporate Governance found that the proxy system in the United States is beset with problems ranging from inaccurate data to out-of-date infrastructure, to the vagaries of the voting process itself. These problems can lead to inaccuracies in the voting process and ultimately undermine the ability of shareholders to exercise their rights effectively.

In contrast, Proxymity’s centralized platform offers several potential advantages over the current system. For example, the platform provides shareholders with direct access to the voting process, eliminating the need for intermediaries and reducing the risk of errors or biases in the voting process. This can help to promote good corporate governance and enhance shareholder value. As noted by Ken Bertsch, Executive Director and Jeffrey Mahoney, General Counsel in remarks made by the Council of Institutional Investors to the SEC in 2018, “We believe that a reconceptualization of the system should look first to key principles, and remain open to various alternatives, including a central-ledger book-entry system.”

Furthermore, the adoption of a centralized platform like Proxymity’s can help to address some of the challenges associated with shareholder activism. Shareholder activism has become an increasingly important aspect of corporate governance in recent years, with activist investors seeking to influence the decision-making process of companies. However, the current proxy voting system can make it difficult for activists to exercise their voting rights effectively, particularly in cases where there are multiple intermediaries involved in the voting process. By providing a single, centralized platform for proxy voting, Proxymity can help to facilitate shareholder activism and promote greater engagement between shareholders and companies.

Of course, the adoption of a new system for proxy voting is not without concerns. Some may worry that a centralized platform like Proxymity’s could be vulnerable to cyber attacks or other security breaches. However, the company has taken steps to address these concerns, including using advanced encryption and multi-factor authentication to ensure the security and integrity of its platform.

In conclusion, the adoption of a centralized platform like Proxymity’s represents a potentially significant step forward for corporate governance in the US. By streamlining the voting process and reducing the risk of errors or biases, such a platform could help to promote good corporate governance, enhance shareholder value, and facilitate greater engagement between shareholders and companies. As statements made to the SEC by the Council of Institutional Investors have articulated for some time “investors seek a proxy voting system that is timely, accurate, transparent (including through routine end-to-end vote confirmation) and efficient.”