Shareholder voting can be defined as the process through which the people who hold the shares of a company exercise their voting rights. One of the main rights of the shareholders of any company is to vote to influence the major decisions related to issues. Some of the issues may include the composition of the board of directors, corporate actions, approval of dividends, and making changes to the operations of the company ( Hirst, 2016 ). It is through the voting process that the shareholders can give their views and influence the direction that the organization will take in the market. It is imperative to state that the stakeholder voting process is different from the voting that is usually done to elect democratic government. In the latter case, the focus is usually on giving every individual a single vote that will allow them to influence the government ( Orr, 2003 ). In the case of stockholder voting, the number of votes that the stockholders will have depends on the number of shares that they won. It implies that the kind of influence that a person will have in the voting process depends largely on the number of shares owned in the organization. Furthermore, major shareholders have a controlling interest in the enterprise.
Description of Stockholder Voting
In many nations around the world, there are corporation charter provisions and bylaws that determining how stockholder voting occurs. The regulations, together with corporation laws, determine the voting rights of the stockholders. After a company decides to go private, the shareholder rights will be influenced by the corporation itself ( Lemke, 2018 ). In addition, the company is expected to follow the guidelines that are set by an agency such as the Securities and Exchange Commission (SEC). The stockholders have the right to take part in a voting process aimed at influencing issues that are critical to the operations of the company. However, the stockholders do not have the right to vote on issues related to management and the day-to-day operations of the company. Instead, they can influence the composition of the board and significant changes that are to be made to the company such as those related to mergers and acquisitions. In most countries, public companies set a specific date where the stockholders are expected to attend a meeting to exercise their rights to vote. Those who own the right to vote are usually informed about the record date and given all the reports that they require to exercise their rights.
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Examples of How Stockholder Voting has been Used
Apple
One of the organizations that has used the idea of stockholder voting to determine its activities in the market is Apple Inc. The company engages in the manufacture and sale of mobile phones, televisions, iPads and other electronic devices. In 2021, the shareholders of the company came together to vote for the reelection of the company’s board. In addition, they approved the compensation for the company’s top executive officers ( Leswig, 2021 ). In the same session, the stockholders were given the chance to vote on a proposal that was meant to compel the organization to reduce the pay of the executives compared to the media pay for the other employees. Although the votes were considered to be non-binding, they provided a basis through which the board could determine the policies aimed at taking the company in the direction preferred by the major stockholders. In the recent years, Apple has grown to become one of the largest and most profitable companies in the world. In addition, it is considered to be one of the companies that have contributed to the creation of innovative technologies. By giving the stockholders the chance to vote, it was possible to come up with resolutions that would ensure that the company moves in the right direction.
The second company that has used stockholder voting as the basis for influencing its performance and direction is Twitter, a social media organization that is domiciled in the United States. In 2018, the company stockholders received a proposal regarding the issue of online sexual harassment. This was the first proposal of its kind and it had been raised by the New York State Common Retirement Fund. The company was being asked to give a report with details on the degree to which users of Twitter abuse the existing content policies and contribute to the harassment of other, spread of fake information, and engage in hate speech. The stockholders were called for a meeting as per the existing corporate governance policies ( Tonello, 2018 ). During the session, the stockholders exercised their rights to vote on the proposal on governance. In the same meeting, the stockholders voted for the re-elections of the board of directors of the company. The vote appeared to have reaffirmed the stockholders’ belief in the ability of the board of directors to guide the organization in the right direction. It is through the board of directors that the stockholders are able to indirectly shape the direction taken by the company. Furthermore, the directors are expected to ensure that the interest of the stockholders are safeguarded.
Amazon
Amazon is one of the major players in the e-commerce sector. It has grown from a small bookstore to one of the largest companies in the world. The organization engages in the sale of consumer products in different parts of the world. Today, Amazon operates through three primary segments. They include the Amazon Web Service, North American segment, and international branch. Being a publicly traded company, Amazon gives the stockholders the opportunity to vote on some of the issues that may shape its direction in the future ( McRitchie, 2020 ). In 2020, for example, the stockholders were called upon to vote on a wide range of issues such as the election of the board of directors and the proxy proposals. Another critical issue that was addressed during the meeting was the ratification of the independent auditors. The stockholders were required to vote on the performance of the independent auditors that have been serving the company. The final major area in which the stockholder voting was done was executive compensation. Today, Amazon executives are among the highest paid in the world. With the shares of the company outperforming its competitors in the market, the stockholders voted to support an increase in the executive compensation based on the level of share appreciation.
Bank of America
The Bank of America is considered to be one of the leading financial institutions in the world today. The organization serves a wide range of individual customers, small businesses and large corporations. It services include investment management, asset management, banking, and risk management. Over the years, the company has cut a niche for itself as a provider of high-quality services to its diverse clients. Furthermore, the organization has been working towards improving the innovativeness and quality of services it offers to its customers. Like any public company, Bank of America accords its stockholders voting rights ( Dubrowski, 2020 ). The voting rights largely depend on the number of shares that the shareholders have in the company. In 2020, for example, the stockholders were given the chance to vote on a wide range of issues during the company’s annual meeting of shareholders. One of the areas that the stockholders voted was the board. During the voting process, the stockholders elected 17 members to join the board of directors. Each member received at least 93% of the votes that were cast by the stockholders ( Dubrowski, 2020 ). In the same meeting, the stockholders voted on a proposal related to the compensation of the executive. The proposal was approved by about 94% of the stockholders who voted. Finally, the stockholder voting process was used to approach the appointment of an independent firm to carry out accounting activities and audits at Bank of America.
Goldman Sachs
Goldman Sachs is an American corporation that offers a wide range of securities, investment banking, property management, and financial risk management services to its consumers. The organization works with clients from different parts of the world. Over the years, the organization has strived to create and follow clear and appropriate corporate governance guidelines and regulations. In addition, the company has been working with its stockholders to create systems and policies that will result in better performance. In the 2020 annual general meeting, the stockholders were required to vote on four major issues that would influence the activities of the company. The first area that they were voting on was on the election of the board of directors ( The Goldman Sachs Group, Inc., 2020 ). Secondly, they were required to give an advisory vote on the compensation of the company’s top executives. The third issue was the vote on the selection of PWC as the independent auditor to work with the company. Finally, there was a vote on the shareholder proposals. The meeting allowed the stockholders to determine the fate of the company and influence some of the approaches that would be used to achieve the desired goals.
Summary
Modern companies operate in a highly dynamic world. In addition, the companies compete against each other across different areas of business. The success of the company depends on the extent to which they meet the needs of the customers. It is also worth stating that investors are always looking for profitable companies. Other investors focus on the future growth of the company. Once the investors have put their money and become shareholders, they expect to be allowed to have a voice on some of the issues that are done in the company. These opportunities are usually provided in the meetings where stockholder voting take place. From the foregoing analysis, it is apparent that companies use stockholder voting for a wide range of objectives. In most instances, the stockholder voting is done to address issues such as the composition of the board, size of the board, mergers, acquisitions, and the selection of auditors. In this regard, the stockholder voting practice gives shareholders the chance to influence decision making in a company. Furthermore, it is a practice that allows the shareholders to determine the direction that an organization will take in the market while trying to achieve short-term and long-term business goals.
References
Dubrowski, J. (2020, April 22). Bank of America announces preliminary voting results from 2020 annual meeting of stockholders. Businesswire, https://www.businesswire.com/news/home/20200422005947/en/Bank-of-America- Announces-Preliminary-Voting-Results-From-2020-Annual-Meeting-of-Stockholders
Hirst, S. (2016). Social responsibility resolutions. The Harvard Law School Program on Corporate Governance Discussion Paper. No. 2016-06.
Leswig, K. (2021, Feb 23). Apple shareholders approve executive compensation; dividend increase coming. CNBC , https://www.cnbc.com/2021/02/23/apple-shareholders-meeting- 2021-approve-tim-cook-pay.html
Lemke, L. (2018). Regulation of investment companies . Routledge.
McRitchie, J. (2020, May 21). Amazon 2020 special meetings & more. https://www.corpgov.net/2020/05/amazon-2020-special-meetings- more/#:~:text=Amazon%202020%20annual%20meeting%20is,all%20shareholder%20pr oposals%20except%20%2312 .
Orr, G. (2003). Realizing democracy: Electoral law . Routledge.
The Goldman Sachs Group, Inc. (2020). Notice of 2020 annual meeting of shareholders. https://www.goldmansachs.com/investor-relations/financials/current/proxy- statements/2020-proxy-statement-pdf.pdf
Tonello, M. (2018). Shareholder voting in the United States: Trends and statistics on the 2015- 2018 proxy season . https://corpgov.law.harvard.edu/2018/11/26/shareholder-voting-in- the-united-states-trends-and-statistics-on-the-2015-2018-proxy-season/
