Episode Transcript
Laura Starks: We found that there were many more votes in favor of, like climate change, shareholder proposals, or other environmental proposals by the decentralized voters, by the the external sub advisors. Then there had been by the index funds, internal stewardship team.
Stephanie Maier: Welcome to FTSE Russell Convenes I'm Stephanie Maier, I'm Global Head of Sustainability at FTSE Russell. And in this session we're talking about decentralising proxy voting power and investor democracy. And I have huge, pleasure to welcome Laura Starks to talk about that. Laura, you've written a huge amount of research around proxy voting, corporate governance, and a lot of other sustainable finance themes.
Stephanie Maier: Your latest paper looking at this tight, this topic in particular, could you give us some of the key findings?
Laura Starks: Yeah. So we were interested in what's happening with investor democracy and proxy voting in the United States. And we were particularly interested in if we could predict how investor choice programs by the very large index funds, as well as other asset managers, would result in changes in the proxy voting.
Stephanie Maier: And what did you find?
Laura Starks: So what we found was we looked at and instance before these investor choice programs in 2019, Vanguard, decentralised their proxy voting to their external portfolio managers. In other words, they're sub advisors. So it was 31% of their equity funds that they had had decentralized proxy voting. So we looked at how those funds voting on proxies differed from the Vanguard stewardship team.
Laura Starks: And we found that there was quite a big difference in the proxy voting. And in particular, we found differences in and the voting for directors. It was lower positive votes.
Stephanie Maier: So this issue of whether the voting decision should be passed through to the end beneficiary or whether it stays with the investment manager, it's obviously very topical. One where do you see this issue going, or what type of other research you keen to do next?
Laura Starks: There is so much interest in the that that they have. There are new firms that have developed in order to help investment managers allow for this. Investor choice. And I predict that we will we will see even more in the future because there's increasing interest by investors, by shareholders in mutual funds and being able to express their belief or being able to to vote according to the risk that they see.
Stephanie Maier: And you talked to earlier about the difference in voting from the standard manager approach to when you actually had that pass through voting. You talked a bit about directors. Can you talk a bit about shareholder resolutions as well? That's a very topical issue. How did you see some of that vote behaviour change?
Laura Starks: We found that there were there were many more votes in favor of that climate change shareholder proposals, or other environmental proposals by the decentralized voters, by the the external sub advisors. Then there had been by the index funds internal stewardship team. We also found that there were many more votes in favor of the social shareholder proposals and actually also in in favor of the governance shareholder proposals.
Stephanie Maier: I know it's a topical issue here in the US, but how do you see maybe the number of shareholder resolutions changing over time? It's been very active and a very important part of, the voting process. How do we see some of the changes now maybe impacting impacting that?
Laura Starks: Well, it's been an important part of the the proxy season, and it's been an important way in which many investors are able to convey their opinions to, the, the management of the companies. What we've also found is that sentiment affects the ESG sentiment and the financial sentiment from market psych affects the the number of shareholder proposals that get presented to a firm.
Laura Starks: So so when sentiment is very negative about a firm, you're much more likely to see a shareholder proposal arise. And and having this investor democracy then allows the shareholders to provide their views, which, which can back up the fund managers if they want to engage with companies about these issues.
Stephanie Maier: We're certainly seeing more and more of this pass through voting enabled by technology, and a lot more choice being enabled through this mechanism. But I think it's safe to say it will be an interesting area to continue to look at. And I'm sure you'll be doing a lot more research in that area. So thank you very much for sharing your findings and insights.
Laura Starks: Thank you.
