Can someone provide me with published academic or economic studies
showing that the costs to an institutional investor of voting proxies
on securities owned by it generally outweighs the benefits to it of
voting those proxies? By way of background, the Department of Labor
has said that pension plan fiduciaries have an obligation to vote
proxies because they are a "plan asset," but has also said that plan
fiduciaries can dispense with voting proxies if they think the costs
will outweigh the benefits. Thanks |
Request for Question Clarification by
pafalafa-ga
on
30 Dec 2005 07:11 PST
Steve,
Thanks for posting such an interesting question.
There's a good deal of information out there -- some of it quite
academic -- that discusses the obligation to consider costs and
benefits of proxy voting. However:
1) I do not see any indication at all that the financial community
considers the costs to generally outweigh the benefits.
2) Most of the material is quite general in nature, without any
detailed discussion of either costs or benefits, and nothing that
really quantifies either. For instance, here's a recent, in-depth
report on the topic, from a Canadian perspective:
http://www.share.ca/files/pdfs/Acting%20Like%20Owners.pdf
ACTING LIKE OWNERS: PROXY VOTING, CORPORATE ENGAGEMENT AND THE
FIDUCIARY RESPONSIBILITIES OF PENSION TRUSTEES
that reviews a lot of the literature on voting costs and benefits, but
doesn't provide any hard and fast numbers.
3) The SEC has acknowledged that costs can exceed benefits in some
cases, for example, in voting on shares in a foreign commodity, that
may involve specialized rules or the need for translations.
In general, plans seems obliged to have a process (or their own
design) in place to evaluate voting costs and benefits, but -- from
what I can tell as a non-professional -- are not obliged to actually
vote if they feel it is not in their interests to do so.
Let me know if I should post all the materials I have as an answer to
your question. If that wouldnt' be satisfactory, perhaps you can
spell out in a bit more detail what sorts of studies you're hoping to
find.
Thanks,
pafalafa-ga
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Request for Question Clarification by
pafalafa-ga
on
30 Dec 2005 20:39 PST
Steve,
There was a glitch in the system for a while, but it seems to be back
in action now, so I just wanted to post another note, in the hopes
that you'll get an email notification.
Let me know your thoughts on my earlier comment (above).
paf
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Clarification of Question by
steve2006-ga
on
31 Dec 2005 06:08 PST
Thanks for the information. I saw the article
[http://www.share.ca/files/pdfs/Acting%20Like%20Owners.pdf] earlier
yesterday morn. It's a good summary of the legal considerations that
prompted my question. To try to be more specific, because the
regulators have said "vote proxies unless it costs too much," has
anyone done an economic or empirical analysis that shows that voting
proxies isn't worth the cost except in limited circumstances (e.g.,
big positions). This is probably the case with routine proxy
solicitations (e.g., reappointment of accountants) but could well be
true in other cases, especially where there are hurdles and costs to
voting (recalling shares on loan, translating foreign documents,
appearing in person to vote, paying proxy voting services, etc.) and
voting may have other costs (like forgone revenues from having the
shares recalled from a lending arrangement or having foreign shares
subject to restrictions on subsequent transfer under share blocking
restrictions in some foreign countries). Obviously, it's easier to
make the case with foreign securities (and both the decade old DOL
guidance and SEC releases note foreign shares as good examples). I
hope this helps - and thanks
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