Corporations run the world, but who runs the companies? It’s not just the board or the executives — it’s the shareholders participating in proxy elections. Proxy voting empowers shareholders to weigh in on corporate decisions like how much a CEO gets paid or who sits on the board. These votes have become battlegrounds for corporate control in recent years, with a record 1,151 activist investor campaigns in 2023.

Shareholders represent: While these campaigns could reshape American businesses, just 28% of shares owned by individual investors were cast in proxy elections last year. Compounding the issue, most American investors hold stocks through mutual funds and exchange-traded funds (ETFs), which typically don’t allow shareholders to vote. Instead, major ETF providers like BlackRock (iShares), State Street (SPDR), and Vanguard — controlling nearly 75% of the ETF market combined — cast votes on their behalf. But for the first time, ETF investors will have a say:

• Index funds now allow individual retail investors the opportunity to direct their shares’ votes based on their preferences, aiming to boost shareholder participation.
• Instead of direct voting, BlackRock offers ETF investors the choice to delegate their votes to one of six different policies, including options like Socially Responsible Investment, Catholic Faith-Based, and Climate.

Why vote?

Votes have value and can influence the fate of the stocks you own. In 2021, Exxon MobilXOM

faced a monumental boardroom battle —resulting in the appointment of board members prioritizing a shift to green energy. Companies like SalesforceCRM

and IlluminaILMN

  have also faced proxy campaigns in recent years. Even DisneyDIS

is currently fending off an attack by billionaire investor Nelson Peltz.

• Peltz believesDIS
  is underperforming, so he’s seeking board seats to overhaul CEO Bob Iger’s strategy ahead of its April 3 annual shareholder meeting.
• Got 500K Disney votes? One mystery buyer was willing to pay $100K on Shareholder Vote Exchange at the beginning of this month.

Just so you know… The ETF proxy voting initiative isn’t a perfect representation of shareholder democracy, but some representation is better than none. Two dominant companies in the proxy industry will manage the new policy-based voting. Even so, companies might find ways to resist change — Exxon recently sued to prevent new activist proposals from voting. But that might be all the more motivation to vote, potentially paving the way for change.