If retail investors received a "participation" grade, they'd definitely be flunking.
A key benefit of owning shares in a company -- besides the gains or losses as the stock moves -- is the ability to vote in corporate elections. Shareholders get a voice in many key decisions, including the approval of members on the company's board of directors.
It's a lot of power, but average Joe's who own stock rarely bother to exercise it.
A paltry 27% of retail investor shares were voted during the fall 2013 proxy election season. That's even worse than the turnout in U.S. political elections -- 57.5% of eligible U.S. citizens participated in the 2012 presidential election.
"The retail shareholder base is largely not engaged," said Chuck Callan, chief regulatory officer at Broadridge Financial Solutions (BR), which processes and distributes proxy materials to investors.
The poor turnout among mom and pop investors means their voices are being drowned out by large institutions on hot-button issues like executive compensation, the environment, social responsibility, political spending disclosure and board composition.
Not even the advancement of e-voting or the drama surrounding shareholder activism has been able to entice retail investors to vote their shares.
According to Broadridge, retail investors voted 27% of their shares during last fall's "mini" proxy season, down from 29% the year before.
By comparison, pension and mutual funds -- a group known as institutional investors -- voted a whopping 85% of the shares they own, up from 80% in the fall of 2012. That could partially be due to the fact that many institutional investors must report to clients whether they vote.
Callan blamed a 2007 Securities and Exchange Commission rule for hurting voter turnout. The so-called "e-proxy" or "notice and access" rule allows companies to send out a one-page notice informing investors that proxy materials are available electronically instead of shipping them a full package.
While companies save on postage and printing costs, Callan said the response rate for this type of notice stands at a pathetic 5%, compared with more than 30% voting when they are mailed ballots.
The diminished retail participation comes even as investors overall turn up the heat on corporate boards.
About 69% of directors received support from at least 90% of investors in the fall, down from 72% the year before, Broadridge said. Large-cap directors saw this closely-watched support level drop to 86% from 95%.
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