Jill E. Fisch is the Saul A. Fox Distinguished Professor of Business Law at the University of Pennsylvania Law School. This post is based on her remarks before the SEC’s Investor Advisory Committee.
Thank you for the opportunity to participate in the committee’s discussion about engaging with beneficial owners. I come to today’s discussion in two capacities. As an academic, I have researched and written extensively about mutual funds, shareholder voting and the distinctive challenges to effective retail investor participation in corporate governance. As a retail investor, I can speak from personal experience as to those challenges.
I am a chaired professor at the University of Pennsylvania Carey Law School where I have been teaching and writing about securities regulation and corporate governance since 2009. Prior to that I taught at Fordham Law School for almost 20 years. I previously practiced law at a Wall Street firm and the US Department of Justice.
Statistically we know that retail investor participation in corporate governance is extremely limited. Retail investors own almost 1/3 of publicly traded equity, yet only about 29% of retail shares are voted, compared to around 90% of shares held by institutional investors. So retail investors often own enough stock to make a difference, and the question is why don’t they participate more?
Several factors limit retail participation in corporate governance. One is information. Unlike institutional investors, retail investors generally do not have access to efficient sources of information about shareholder votes such as the reports and recommendations of proxy advisors. Although proxy statements contain extensive information, they are so long and detailed that, as a practical matter, most investors ignore them completely. Tesla’s 2024 proxy statement, while concededly an outlier, was 443 pages including appendices. Media reports provide information on certain high-profile votes like proxy contests and mergers, but that information is often the product of journalistic choices and need not include information investors might want to know.
A second constraint is time. Voting is a cumbersome process. For retail investors, it generally requires logging into their brokerage account and then logging into a separate platform such as proxy vote to vote their shares. Multiple accounts may not be integrated and may require multiple logins. Then the investor must populate each individual voting decision separately. This process must be repeated each time there is new voting period for an issuer – so it isn’t like an investor can go through this once each proxy season. There is no mechanism to prepopulate according to an investors’ general voting policies, a procedure of providing advance or standing voting instructions that institutional investors have access to and that I have recommended be extended to retail investors.[1] READ MORE
