Public companies work a bit like democracies. Most shareholders have the right to vote on important issues – whether that’s electing a new board of directors, approving mergers and acquisitions, or agreeing to an executive’s pay package.
Those with the biggest stake in the company have more votes and wield the greatest influence. However, minority shareholders in investments like stocks and investment trusts can club together to bring about positive outcomes too.
This means it is important to exercise your voting rights, even if you only own a small number of shares.
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“The exercise of shareholder rights is a fundamental part of the stewardship of one’s assets,” Chris Kinder, CEO of the Investor Forum, said.
“Companies need to hear from all of their investors – retail and institutional – and be able to engage with them in the most efficient way.”
You have probably heard stories of shareholder revolts in the news. For example, shareholders famously tried to fire Mark Zuckerberg as Facebook (now Meta) chairman in 2018 and 2019.
In the first vote, 51% of shareholders supported the proposal. This increased to 68% a year later. Zuckerberg managed to cling onto power because the company’s share class structure means that he controls the vast majority of the voting power. He gets ten votes for every share, while most regular shareholders only get one.
That said, there are plenty of examples where shareholders have used their voting rights to block management decisions. In November 2023, shareholders in Qantas airlines voted overwhelmingly against the proposed executive pay package at the company’s AGM (83% of votes). The chairman of the board, Richard Goyder, was heckled by shareholders who shouted “shame on you”, after the company suffered a string of challenges in the lead-up to the AGM.
What are shareholder voting rights?
When you buy common stock in a company, it usually comes with voting rights – typically one vote per share. This gives you the power to influence key decisions that the company makes.
Not all shares come with voting rights, but most do. For example, some investors choose to buy preferred stock instead of common stock. Preferred shares have a superior claim on the company’s assets and earnings in the event it goes bust or can’t afford to pay out a dividend. However, they do not come with voting rights.
Some companies also offer dual-class shares, which give some investors superior voting rights. For example, one share class might offer one vote per share, while another might offer ten or a hundred votes per share.
Bear in mind, though, that shareholders don’t always have the final say on executive pay. In December 2024, a US judge blocked a $56 billion pay package for Elon Musk that Tesla shareholders had approved six months before, arguing that Tesla’s board was too heavily influenced by its CEO.
Can I vote if I hold shares through an investment platform?
Most investment platforms allow you to exercise voting rights on shares held in your account. This is true for the likes of Hargreaves Lansdown, Interactive Investor and AJ Bell. The process will vary slightly from provider to provider – and some make it easier than others. But the good news is that many platforms are now taking steps to simplify things.
“It’s all about removing barriers and making it easier and more intuitive”, explains Interactive Investor's chief executive Richard Wilson. Interactive Investor is the UK’s second largest platform for private investors.
Proxy voting through investment platforms played a major role when seven investment trusts rejected takeover attempts from Saba Capital earlier this year.
The vote was something of a milestone in the history of shareholder rights and proxy voting. According to Hargreaves Lansdown, the Herald vote saw a record percentage of shareholders in the investment trust vote on the proposals.
“We have seen a significantly higher proportion of clients voting than normal as a result of our campaign to proactively inform clients,” said Emma Wall, head of platform investments at Hargreaves Lansdown. The campaign included contacting every investor who held Herald shares and explaining how to vote via the Hargreaves Lansdown platform ahead of the general meeting.
Institutional investors have a long history of exercising their voting rights and putting pressure on company management teams. But it is becoming increasingly important to private investors too, as these developments show.
Do I have voting rights if my shares are held in a fund?
Lots of people entrust their money to a professional fund manager, choosing to invest in a pooled fund rather than picking individual stocks. If you go down this route, the fund manager will research companies on your behalf, investing your money in line with an agreed objective, strategy and risk profile.
You will still have voting rights, but your fund manager will need to exercise them on your behalf through a process called proxy voting.
As some of the largest shareholders, when fund managers like Vanguard, BlackRock, State Street, Berkshire Hathaway and Fidelity speak up, investee companies have to listen. However, it is important to look into if and how your fund manager is using your voting powers. Don’t blindly trust that they are acting in your best interests – particularly if you have strong views on how certain environmental, social and governance (ESG) issues should be handled.
Different fund managers have different ways of applying proxy votes. Some may simply make a decision on behalf of their shareholders. Vanguard, for example, ignored 400 shareholder proposals for environmental, social and governance-related actions during the 2024 AGM season in the US. This was despite rolling out a proxy voting scheme the previous year that it said would allow investors to direct how their funds voted on ballot items for some of the largest holdings.
In December 2023, a group of asset owners published an open letter highlighting some of the shortcomings of proxy voting, highlighting the significant influence that fund managers wield at AGMs, and argued that this power isn't always being used in shareholders’ best interests.
“Regrettably, we have continued to evidence a divergence between the voting behaviour of appointed asset managers, when compared with our investment principles and the expectations of our beneficiaries,” especially on matters relating to ESG, it said.
There is, then, still a gap between the influence of large fund managers and that of individual investors (en masse).
AIC launches ‘My share, my vote’ campaign
The Association of Investment Companies (AIC) has launched a campaign it hopes will give all investors the ability to exercise their shareholder voting rights.
The ‘My share, my vote’ campaign aims to stamp out poor practices among some investment platforms and providers, including failing to pass on information about upcoming votes and voting rights, charging customers to vote, and not exercising customers’ votes when asked to do so.
“It’s simply unacceptable that investors find themselves left in the dark about their right to vote, prevented from voting or charged for the privilege,” Richard Stone, AIC’s CEO said. “If we are serious about shareholder democracy, investors must be able to have their say.”
The AIC is campaigning for the government to change company law to improve shareholders’ access to voting rights. A link to its petition to Parliament can be found here.
“All shareholders must be able to vote – it’s their fundamental right,” says Stone. “The Companies Act currently states that nominees, such as platforms, may pass on company information and voting rights. We believe that’s not good enough. These rights must be passed on and the law should be changed accordingly.”
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