Proxy voting is a key tool in the world of investment and corporate governance. It allows shareholders to exercise their right to vote on a company’s decisions, even if they cannot physically attend shareholder meetings. This mechanism is especially useful for institutional investors, who manage assets of multiple shareholders.
For practical purposes, proxy voting consists of a shareholder delegating his vote to another person or entity to exercise it on his behalf. This delegation is usually done through a proxy voting advisor or specialist, who reviews the shareholder meeting proposals in light of the voting policy defined by the client. Based on this review, the client is presented with a detailed analysis and voting recommendation that is aligned with its values or strategies.
Types of Proxy Voting Policies
The advisor’s voting recommendation is based on a previously elaborated policy that allows shareholders to prioritize different objectives according to their interests and values. Among the main policies are:
1. Corporate governance policies.
These policies are aimed at ensuring transparency, accountability and efficiency in corporate management. Shareholders who adopt this policy usually focus on the independence of boards of directors, the structure of executive compensation and the strengthening of minority shareholder rights.
2. ESG Policies (Environmental, Social and Governance)
These policies seek to promote responsible practices in sustainability, equity and governance issues. They address issues such as reducing carbon emissions and combating climate change, diversity and inclusion on boards of directors, and improving working conditions and protecting human rights.
3. Ethical policies
Designed to align business decisions with specific ethical principles, such as respect for human rights, the eradication of abusive labor practices or the rejection of activities considered controversial, such as the manufacture of weapons or gambling.
4. Policies based on religious or cultural values
These policies reflect the religious or cultural beliefs of the shareholders. For example, Catholic proxy voting policies protect decisions that seek to promote human dignity, life and family, and the protection and care of creation.
5. Long-term investment policies
Some shareholders adopt policies designed to maximize the long-term value of their investments. This includes supporting initiatives that promote innovation, sustainable growth and financial stability.
6. Corporate activism policies
These policies seek to actively influence corporate decisions to promote meaningful change. They are often associated with activist shareholders pushing for reform of a company’s governance, capital structure or operating practices.
We highlight the key points of each of these policies; however, they are not necessarily mutually exclusive and the client can even create its own policy that includes all the points it wants to protect at shareholder meetings.
The role of advisors in proxy voting
Proxy voting advisors play a crucial role in this process, especially for investors managing multiple assets. Their main function is to review the proposals presented at shareholder meetings in light of the voting policy established by the client.
They analyze the shareholder meeting proposals or each agenda item from the perspective of the values and objectives that the client wishes to adopt. Based on this analysis, they prepare a detailed report with an informed and substantiated voting proposal. This technical support enables shareholders to make decisions consistent with their interests, without losing sight of key strategic or ethical issues.
What is the role of proxy voting today?
In today’s business environment, proxy voting is more relevant than ever, as it provides shareholders with a direct tool to influence corporate management and policies. This is especially important in a context where societal expectations about corporate responsibility are growing.
Shareholders use proxy voting to address critical issues such as sustainability, governance transparency and labor rights. In addition, decisions made through this mechanism can have significant impacts on the reputation and financial performance of companies, underscoring its importance as an instrument of participation in corporate governance.
In short, proxy voting allows shareholders, especially large institutional investors and ethical funds, to actively participate in the governance of the companies in which they invest.
Being a growing trend, in the case of Catholic investors, it becomes a tool to ensure that corporate decisions are not only for financial returns, but also aligned with their values, thus contributing to a coherent investment in line with their principles, generating a community and with the opportunity to generate a positive impact on companies.
