Proxy voting has historically been a cumbersome process for endowments, however, As You Vote, an ESG-aligned proxy voting platform, simplifies proxy voting and empowers endowments and other institutional investors to vote their proxies in line with their ESG mandates.

INTRODUCTION

The proxy statement is the document used by companies to seek approval from shareholders on a range of issues that affect companies’ operations and profitability, and their environmental and social impact. The proxy informs voters about board directors, executive compensation, and each issue that is up for a vote, recognizing that most shareholders will vote remotely “by proxy” rather than in person at each company’s annual meeting.

To vote proxies at a company, the shareholder must have owned at least one share of stock on a record date - the official date a shareholder must be an owner on the company's records.  If a shareholder does not actively vote their proxies, their vote(s) are either given to their broker to vote on their behalf or they become “non-votes" and are not counted. While all shareholders have the right to vote their proxies, it is underutilized among higher education endowments. Less than 10% of higher education endowments voted proxies consistent with their responsible investing criteria according to the 2022 NACUBO-TIAA Study of Endowments.  

Proxy voting has historically been a cumbersome process for endowments, however, a new sustainability and justice aligned proxy voting platform, As You Vote, simplifies proxy voting and empowers endowments and other institutional investors to vote their proxies in line with their ESG mandates.  

WHAT IS PROXY VOTING?

Publicly traded companies report the results of their activities and proxy votes to shareholders through their annual general meetings (AGM). Before those meetings, shareholders receive information on topics to be voted on at the meeting, and investors who own applicable voting shares in the company are eligible to vote on these issues. The term proxy vote refers to a ballot cast by a single person or firm on behalf of a corporation's shareholder who may be unable to attend a shareholder meeting. Shareholders receive a proxy ballot in the mail along with an information booklet called a proxy statement, which describes the issues to be voted on during the meeting. Shareholders vote on a variety of issues including the election of board directors, executive compensation, auditor selection, merger or acquisition approvals, approving a stock compensation plan, and shareholder resolutions submitted by investors six months prior to the AGM. Registered investment management companies may also cast proxy votes on behalf of mutual fund shareholders or high-net-worth investors in separately managed accounts. Some of the votes are binding, meaning that for electing board directors the company must take action. Shareholder proposals are “precatory” or non-binding, meaning that even if a majority of the votes are cast for a resolution, the company is not obligated to act. Because endowments often own thousands of companies and each proxy ballot has an average of 20 items, the complexity and size of the task means that endowment professionals often leave proxy voting to their investment managers. Many of these default to vote with company management even if those votes are out of alignment with the endowment’s mission and investing thesis. Often, certain topics like climate change, workforce diversity, and political spending may be up for a vote in which an endowment may want to vote against management. If they do not vote their proxies themselves, and outsource their votes to investment managers, their vote may default to a vote with management.

WHY SHOULD YOU VOTE YOUR PROXIES?

The spring 2023 U.S. proxy season saw 335 votes on shareholder proposals asking for disclosure and action on environmental, social, and related corporate governance (ESG) issues. 

Proxy voting is a powerful tool that endowments can leverage to engage effectively with the companies in their portfolio. Proxy voting helps endowments act in their long-term economic interests by voting their proxies in favor of responsible, sustainable corporate behavior. 

OVERVIEW OF AS YOU VOTE

As You Vote is a proxy voting service offered by As You Sow on the Broadridge ProxyEdge platform. It simplifies proxy voting and empowers endowments and other institutional investors to vote their proxies in line with their sustainability and justice mandates, using a time and cost-efficient platform with optional customization. After signing up, every item on every proxy ballot in an endowment’s portfolio is cast, aligned with the As You Sow proxy voting guidelines. Nothing else is required. Subscribers can easily change any ballot item in the 6 weeks prior to the AGM; a voting report will indicate which ballot item was customized.

As You Vote differs from the two most popular sustainability-aligned policies at proxy voting services, ISS and Glass Lewis, in three main ways.

• Customization: As You Vote allows the asset owner to customize votes if they would like to vote differently than As You Sow’s recommendations. Customization is not necessary but is an option for each individual ballot item. ISS-SRI and Glass Lewis-ESG do not offer the option for asset owners to customize votes if they would like to vote differently than each service’s recommendations.
  

• Voting Record: As You Vote votes in favor of nearly 100% of pro-ESG related resolutions, compared to ISS-SRI, which votes for less than 90%, and Glass Lewis-ESG, which votes for less than 50% of pro-ESG resolutions. These voting trends track across issues including voting against large executive pay packages or against Board Directors. In both areas, As You Vote votes against management over 70% of the time, whereas ISS-SRI and Glass Lewis-ESG vote against management less than 40% of the time. You can view a side-by-side comparison of the voting records of As You Vote, ISS-SRI, and Glass Lewis-ESG in Figure One.

• Cost: As You Vote is comparable in cost to other services, costing $15 per equity, with a $1500 minimum.

Figure One: Comparison of the Voting Records of As You Vote, ISS-SRI, and Glass Lewis-ESG in the 2022 Proxy Voting Season

MAKING AN IMPACT - Warren Wilson College (WWC)

In 2018, WWC took the first step to have a say in how its proxies were being voted: they set up a separately managed account (SMA) as the vehicle for the endowment’s passive domestic equity investments. Consulting with the Intentional Endowments Network, WWC came to understand that voting its own proxies for the 1,000+ companies it owned in the separate account would demand more time and expertise than the endowment’s small finance staff could afford.  In the spring of 2021, WWC signed up for As You Vote.

Utilizing As You Vote, in the 2021-2022 engagement season, over 13,000 votes were cast at approximately 1,200 companies on behalf of Warren Wilson College. Of these votes, 420 votes were cast in favor of shareholder proposals on topics including climate change (27), racial justice and gender equity (38), executive compensation (21), political spending and lobbying disclosure (41), and human rights and supply chain issues (16). Among other successes, WWC’s proxy votes cast in favor of shareholder proposals contributed to majority votes at General Electric where 98% of shareholders voted for the company to reduce greenhouse gas emissions by committing to meet net-zero targets (including Scope 3 emissions tied to their supply chain) by 2050. Additionally, at American Express and Union Pacific, WWC's proxy voting contributed to 60% and 81% of shareholders’ votes, respectively in favor of assessing the effectiveness of each company's diversity, equity, and inclusion efforts. WWC’s proxy votes also contributed to meeting the thresholds of shareholder support needed to refile shareholder resolutions next year for many racial equity proposals. 

This engagement season, from July 1, 2022 to June 30, 2023, 1,090 proxy ballots were cast at 1,067 companies on behalf of Warren Wilson College. The total votes cast for this engagement season were 12,160. Read the 2022 Briefing Paper: Warren Wilson College & 2023 Briefing Paper: Warren Wilson College for more information on how WWC leveraged As You Vote to pursue its active ownership goals through resolution filing, direct engagement, and proxy voting.  

WHAT CAN YOU DO - NEXT STEPS

To sign up for this service, follow these simple steps:

• Visit As You Vote and fill out this short form.
• A representative of Broadridge will contact you to subscribe to the service.
• You can then customize your votes and access detailed reports about every ballot.

What it costs:

• $15 per equity, with a $1500 minimum.
• Profits on this service are split between As You Sow, IEN, and Confluence Philanthropy to fund continued education and peer-learning among endowments and other institutional investors. 

CONCLUSION

Proxy voting holds significant importance in aligning the mission of endowments with their investments. As You Vote simplifies this underutilized tool and enhances the process so endowments can exercise their right to vote their proxies and meet their active engagement goals without the increased demands of time and expertise. As evidenced by Warren Wilson College, this seamless, customizable platform supports endowments so they can act on corporate governance issues that matter to their long-term economic interest.

Learn more about IEN’s work supporting endowments and other institutional investors in utilizing their power as shareholders by engaging in our Shareholder Engagement Initiative, or contacting [email protected].

ABOUT THE INTENTIONAL ENDOWMENTS NETWORK

The Intentional Endowments Network (IEN) is a peer learning network of 200+ asset owners, asset managers, consultants, OCIOs, and nonprofit partners. An initiative of the Crane Institute of Sustainability, IEN works to advance the field of sustainable investing and encourage endowments and institutional investors to allocate capital in a way that creates a low-carbon, equitable, and regenerative economy. It does so through in-person and virtual convenings, resource development, and partnerships. IEN’s premier convening, the Higher Education Leadership Summit, will be held in Long Beach, CA, February 11-13, 2024. www.intentionalendowments.org