In Baseball And Corporate Proxy, Change Can Be A Home Run

Some of our biggest rites of spring are changing for the better. Of course, I’m talking about two of my favorite annual events: baseball’s opening day and the start of the corporate proxy season—both of which this year will feature innovations designed to streamline and enhance the experience for all participants.

Last year, Major League Baseball (MLB) instituted strategic rule changes designed to improve the pace of play and make the game more engaging for fans. The league implemented a pitch timer, limits on defensive shifts and bigger bases. The changes were considered a huge success. Batting averages throughout the league were up five points last year, and the number of bases stolen and runs scored per game also increased. Attendance was up 9.6% and the average length of a game declined by 24 minutes. Huge improvements all around!

The league is also pushing ahead with an even more radical experiment: automated ball and strike calls. As was the case last season, automated balls and strikes (ABS) will be used extensively this year in AAA minor league baseball games. These electronic systems determine whether a pitch is a ball or a strike and communicate the correct call to the umpire. Although the league says there will be no “robo-umps” of any kind at the major league level this year, in my opinion it’s only a matter of time before it’s adopted in “the show.” The technology is powerful and unobtrusive and brings clear benefits to the game.

Giving Retail Shareholders Better Access and More Say

In the same way that Major League Baseball instituted changes to make the game more accessible to fans, regulators and the financial services industry have implemented some dramatic changes to make proxy voting more accessible to retail investors—and they are experimenting with additional innovations this spring.

At the top of the list of important enhancements already in place are virtual shareholder meetings (VSM). Virtual shareholder meetings make it easier for retail shareholders to participate in the corporate governance process. They also eliminate costs for venues, transportation and physical security, while reducing carbon emissions by removing the need for travel to in-person annual meetings. Broadridge rolled out its VSM technology in 2009. In 2023 we hosted 2,425 virtual shareholder meetings, attracting more than 60,000 attendees. Because this technology helps increase shareholder participation while also delivering real benefits to companies, we are projecting continued growth for VSMs in 2024 and beyond.

Proxy voting apps are another innovation making it easier for retail investors to cast their votes. Since its launch in 2021, more than 133,000 investors have downloaded Broadridge’s ProxyVote App, which enables them to not only submit their votes and confirm that their vote has been tabulated but also to preset voting instructions to specify how they want to vote on common types of proposals, including elections of directors and say on pay, among others.

Rule Changes

Regulators are also taking steps to increase shareholder engagement. Last year marked the debut of an important rule change from the SEC intended to give retail shareholders more of a voice. Universal proxy cards make it easier for shareholders to vote for the director nominees they support, regardless of whether those nominees were put forward by the company or by dissident shareholder groups. Under the new rules, ballots produced by either side must list all nominees—not just their own. Instead of having to support the full slate of candidates from one side or the other, or attend a meeting to vote, shareholders can now vote for nominees on an à la carte basis.

Giving Fund Investors a Voice in the Vote

In 2024, some of the world’s biggest asset management companies are going a step further to facilitate shareholder engagement by launching pilot programs for “pass-through voting.” Programs from Vanguard, BlackRock
BLK
, State Street Global Advisors and other asset managers provide various methods to give their fund investors more say in how they cast votes of portfolio companies. Since retail investors don’t directly own the shares of the portfolio companies held in their mutual funds and ETFs, pass-through voting can make their preferences known to asset managers, including on the election of directors and shareholder proposals on climate and social issues. This year, asset managers are reaching out to fund investors in concerted communications campaigns and offering them a variety of choices for pass-through voting. In most of these options, retail investors do not need to review proxies and cast votes for every one of the portfolio companies in their fund or ETF. Instead, they can indicate or select the voting policy they prefer. Funds can then vote the pro rata portion of the underlying equity shares according to the investor’s policy selection.

Broadridge is also developing an alternative solution that will give retail fund investors the direct ability to easily cast a vote on any of the individual equities held in the fund. This new system, which should be available in 2025, will incorporate voting preferences and alert filters to help retail fund investors navigate the potentially high volume of meetings.

All these corporate proxy enhancements are being tested and rolled out gradually. The goal is to see which changes enhance the process and encourage participation. I believe that for the corporate proxy process, the outcome will be similar to the recent experience for baseball fans with pitch clocks and robo-umps. Call it an investor’s home run. It is fantastic to see America’s game evolving, right alongside the trend of democratized investing in America. While we had nothing to do with the former, we exist to deliver for investors on the latter. Change can be scary at first, but in the end, smart policy adjustments and technology innovation will lead to an improved experience and better outcomes for everyone.