The recent regulatory and market interest in the area of corporate governance could prove to be beneficial for the drive to further automate the proxy voting space, said Naz Sarkar, director of Computershare Investor Services, which provides online shareholder services. By calling for the voting process to be made easier and for more shareholders to get involved, regulators may compel investment in technology to facilitate automation of the proxy voting process, he told delegates to CorpActions 2010.
The growing requirement for the beneficial owners of shares to be identified might add to the cause for automation, agreed panellists. But there is still a long way to go to achieving this because there are no standards for formats when tracking this data.
The awareness around risk and risk management in the market is also a potential driver for investment in automation, as shareholders may wish to become more active in the voting process and force through change, suggested Adam Stern, managing director of Ibacas Consultancy.
The UK market is much further advanced than many other markets, noted Sarkar, as electronic lodgement of votes is fairly high but this is limited to the top listed companies. Electronic voting is offered on UK Crest and 70% of this is electronic but the rest is manual and paper-based.
Regulation thus far has also failed to compel automation. The Shareholder Rights Directive proved to be a bit of a damp squib because it did not adopt a tough enough stance and thus led to little change in voting behaviours, noted Sarkar.
Paul Phillips, senior business development consultant at SmartStream Technologies, added that from a software provider point of view, proxy voting remains a “bit of a nightmare”. It is a tough process to join up the voting lifecycle and there is only so far that you can take it, he said. There are machine readable forms for some areas but not others and it is often difficult for providers to determine what the vote is actually about.
“The market needs to do more to join up the proxy voting dots. Swift’s ISO 20022 work is a start and we need to build on this in order to allow for voting execution to be achieved electronically,” Phillips said.
Les Turner, head of operations for Global Proxy Distribution at RiskMetrics, added that differing market practices across the globe cause even more problems. The Shareholder Rights Directive was a step in the right direction to get all European member states on the same page but it fell short because it allowed too much flexibility for these member states in basic areas such as the timing of record dates, he explained.
The panel agreed that the proxy voting space suffers from similar problems to the rest of the corporate actions market but is often left out of the equation because it is thought to be too complex to tackle. “We have come a long way over the last 10 years with the introduction of ISO standards,” said Turner. “But there is a desperate need for more automation and standardisation of the end to end flow of the voting process.”
Panellists agreed that the basic first step is to achieve some level of industry consensus and to get issuers engaged by highlighting the benefits of increased transparency. Phillips suggested that maybe Swift could play the key role here by coordinating industry consensus as a neutral body.