- The Washington Times - Monday, June 9, 2008

The proxy voting forms that many investors toss aside could one day become prized armaments in battles over how companies are run.

Glyn Holton, an author, consultant and self-described practical idealist, is pushing for a system that would let people who own shares of a company transfer the voting rights of their stock to other shareholders so investors with similar goals could establish a bloc of votes.

A “proxy exchange” could make it easier for shareholders upset over, say, the compensation awarded to company management, to hand off their voting rights to a coalition that would agitate for change.

Mr. Holton, who developed the idea after years working in the financial sector, points to a recent skirmish between members of the Rockefeller family and Exxon Mobil Corp. that drew sizable attention but ultimately brought little change.

The descendants of John D. Rockefeller, founder of Exxon predecessor Standard Oil Corp., helped float a shareholder proposal to separate the roles of chairman and chief executive. They said splitting the jobs would make the company more likely to address their environmental concerns. The plan won support from nearly 40 percent of shareholders, slightly fewer than a year earlier.

“Look at the amount of work that has to be done to get one small change at one corporation,” Mr. Holton said. “How many battles are being fought over small details of corporate governance and have no impact?”

While Mr. Holton’s nascent campaign hasn’t drawn wide attention, experts in corporate governance matters say giving like-minded shareholders a way to align their votes could press companies’ boards to pay greater heed to individual shareholders.

“I think this is another step in that process of trying to create a real voice for investors,” said James Post, a professor at the Boston University School of Management, who focuses on corporate governance and ethics.

“If you had one of these exchanges working around the Exxon proposals I think you would have seen substantially more individuals participating in this proxy voting. It would have been almost a perfect mechanism for those who are concerned about climate change issues or governance issues to get involved,” he said.

While Mr. Post praises the proposal for its egalitarian ideals, he said setting up the exchange could be tricky, in part because it could be difficult to educate shareholders about the plan.

“Part of this is a consciousness-raising, a public awareness campaign,” Mr. Post said, adding that he doesn’t see any legal barriers to setting up a way to trade voting rights.

Mr. Holton contends that mutual-fund companies that now place votes on behalf of their shareholders might appreciate being able to focus solely on returns rather than other concerns.

But some funds might not like seeing their voting power diminish if their investors reassign voting rights, said Paul Larson, equity strategist at Morningstar Inc.

Still, he said, the plan is a “net positive.”

“It would definitely increase the power of individual shareholders to make a change and to make their voices heard,” he said. “Oftentimes shareholders just don’t have to the time to read the proxy materials, fill out the forms and drop it in the mail.”

“Selecting someone and saying, ‘I agree with your views, go ahead and vote your shares how you see fit,’ might actually slightly increase the amount of voting activity that actually gets done.”

While building coalitions could become easier, Mr. Larson noted, many company directors might resist more organization among shareholders.

“They generally like to run without interference,” he said. “It may chew up more of management’s time and energy.” He and others noted, however, that allowing more investors to be heard would generally be a good thing.

“There certainly is a real problem in terms of accountability,” Mr. Post said. “Every governance improvement that we have seems to be hard-fought and the reason for that is people who are insulated from accountability will fight [to avoid it].”

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