Stockholm (NordSIP) – Norges Bank Investment Management (NBIM), the asset manager responsible for the Norwegian sovereign wealth fund, has published an analysis of shareholder voting process across 66 markets. The review aimed to single out the steps and deadlines that stand in the way of more efficient voting processes.
Voting is a priority for NBIM. In 2019, it voted on 116,777 resolutions at 11,518 shareholder meetings. At the same time, shareholder voting is an essential component of good corporate governance, which evidence suggests is a strong driver of equity performance. In this context, NBIM’s review provides a starting point for discussions about efficient processes for investor engagement.
NBIM’s report breaks the voting process down into seven steps: agenda-setting by the company, confirmation of shareholder identity and shares eligible for voting by the custodian, reception of meeting materials, receiving voting recommendations from proxy advisors, instructing custodians on how to vote, actual voting and confirmation.
Given all the steps involved in shareholder voting, dates and deadlines are an essential part of the process. According to NBIM, the first date in this process is the record date, when the custodian confirms the shareholders’ identity. NBIM suggests that the problem is setting the date too early, which could lead investors to struggle to assess the relevance of the meeting due to the lack of a meeting agenda at that early stage, among other reasons. NBIM’s survey finds that up to 54% of companies – particularly in Canada, Japan, South Korea, Taiwan and the USA – operate with a record date that is 31 days or more ahead of the shareholder meeting.
The reverse problem is present in terms of the disclosure of meeting materials, which hinder the ability of investors to analyse the materials and make an informed voting decision before the voting deadline. NBIM was generally satisfied with the time allotted it did warn against these issues.
The final deadline is the one for shareholders to cast their votes. According to NBIM, 89% or more of the companies “operate with an effective cutoff date for casting votes that is three days or more ahead of the shareholder meeting.” The asset manager argues that the propensity for information – such as other shareholders’ voter intentions – to emerge in the last days immediately preceding the actual meeting again threatens to lock the vote at too early a stage.
NBIM also highlights issues regarding power of attorney (PoA) requirements, physical attendance and electronic voting. It notes that 41% of the countries require PoAs or
other documentation as an integral part of each voting process, which is a hurdle that can be overcome by increasing the duration of the validity of PoAs. Another limitation is the requirement of physical attendance by 25% of the countries in the study. The problem is even more severe in terms of the lack of an electronic voting system, which NBIM estimates is an issue in 84% of the countries.