Proxy Voting
Proxy Voting is the mechanism by which shareholders authorize a representative — typically the company's management or a third party — to cast votes on their behalf at a shareholder meeting when they do not attend in person.
Under US securities law, public companies must distribute a proxy statement (Form DEF 14A) to shareholders before each annual meeting. The proxy statement discloses the matters to be voted on, including the election of board directors, ratification of auditors, executive compensation (say-on-pay), and any shareholder proposals. Shareholders who do not attend the meeting can submit their votes in advance through a proxy card or an electronic voting platform.
Institutional investors — mutual funds, pension funds, and ETF managers — vote millions of shares across thousands of companies each year. The scale makes independent analysis of every proposal impractical, so most large institutions rely on proxy advisory firms. ISS (Institutional Shareholder Services) and Glass Lewis are the two dominant firms in the US market; together they influence voting outcomes at a significant share of US annual meetings.
ISS and Glass Lewis publish voting guidelines annually, covering topics ranging from board independence standards and director overboarding (serving on too many boards) to anti-takeover defenses and equity compensation plan dilution limits. Retail investors holding shares through brokers can also vote their shares, though retail participation rates are historically low compared to institutional participation.
Proxy voting has become a battleground for ESG-related shareholder engagement. Environmental and social shareholder proposals — requesting climate risk disclosure, pay-equity audits, or lobbying transparency — have proliferated. Support for these proposals has grown as major asset managers incorporated ESG criteria into their voting policies, though recent political pressure led some managers to scale back certain ESG-related votes.
The SEC has updated proxy rules multiple times in recent years, including amendments to the resubmission thresholds for shareholder proposals and to the conditions under which proxy advisors must disclose conflicts of interest.