voting as feedback

Just a thought, but it struck me recently how fundamentally differently I seem to see the exercise of shareholder voting rights compared to some people I know in the asset management business. And judged by the general trend in shareholder voting - very low levels of opposition except in rare cases - this seems to be a general industry perspective.

I find this odd as the right to vote is a formal and direct means to provide feedback to companies - and the market - about views on companies' policies and practices. The continuing reluctance of even supposedly activist investors to vote against in all but a handful of cases is to me problematic. It suggests one of two things. Either investors think everything is basically fine but with the odd problem at the extreme, even in respect of remuneration. Or - I think more likely - they do have concerns but for some reason think it is not productive to express them via their legal rights.

This to me is daft for a number of reasons. First, it's surely a dumb negotiating tactic to give companies the impression that they need to actually steal your wallet before you will vote against them. Would a politician be worried if a constituent told them they would be voting in favour of their re-election but had some concerns? I'm sure something would register, but the primary thought must be 'that vote is in the bag' and focus will turn towards those who are not definitely onside.

Secondly, as I've argued before, this approach can only legitimise behaviour that investors have concerns about. An institution may think they have made a point by expressing concerns before voting in favour, but if the resolution passes with 90% plus in favour what will the outside world think? In essence this sort of covert dissent doesn't give the market a true picture of owners' views.

Thirdly, ultimately therefore I think that this timid approach to voting deprives both companies and investors as a whole from useful feedback. It's a bit like saying you will never sell or short the company's shares. You might convince yourself that you're being responsible, but arguably you're actually distorting the effect of an important feedback mechanism. If you buy the wisdom of crowds type view of markets, then surely it is important that negative or dissenting views are actively expressed. Investors that don't use their voting rights effectively may be doing more damage than they realise.