SEC begins overhaul of voting system for investors

By Zachary Goldfarb
The Securities and Exchange Commission began Wednesday to overhaul the system through which investors vote their shares in public companies.

It's been many years since the primary way for investors to have their voices heard in the boardroom was to go to an annual meeting, stock certificate in hand. Today investors hear from companies through regulatory filings and usually vote by "proxy" -- allowing someone else to vote on their behalf.

The SEC hasn't done a thorough review of this system for three decades. Now, it's asking the public a range of questions about the proxy voting process to determine whether it's working well.

"The proxy is often the principle means for shareholders and public companies to communicate with one another, and for shareholders to weigh in on issues of importance to the corporation," SEC Chairman Mary Schapiro said. "To result in effective government, the transmission of this communication between investors and public companies must be timely, accurate, unbiased, and fair."

The SEC's request for public comment -- known as a concept release -- touches on a number of areas:

• Whether companies are over-counting or under-counting the votes of investors


• The fees associated with voting by proxy


• How companies can send information to some investors whose shares are held by mutual funds or brokerages


• Encouraging investors to take an active role in company votes


• Whether some investors can vote in a way that doesn't reflect their true ownership interest, for example, if they are making side bets against the company