The transition from physical to virtual shareholder meetings (VSMs) made it possible for much of the 2020 proxy season to proceed on schedule, even as the COVID-19 pandemic began to take hold. Despite this accomplishment, widespread difficulties with VSM access and voting left many beneficial owners dissatisfied.
Resolving access and voting problems, as well as delivering a VSM experience that reproduces what is traditionally available at in-person meetings, is the goal of the End-to-End Vote Confirmation Working Group Operations Subcommittee. On February 2, 2021, this industry stakeholder group published a statement about the improvements planned for VSMs in this year’s proxy season.
Twin-Track Approach for 2021
The Subcommittee’s goal is to replicate in a VSM what is traditionally available at an in-person meeting. Historically, at an in-person meeting, beneficial owners wishing to attend in person and vote would obtain a legal proxy from their broker. The Subcommittee has created a safe and secure digital process using application program interfaces, or APIs, to effect a digital legal proxy and validate a beneficial owner’s attendance and voting right. VSM platforms will ask beneficial owners to input the control numbers they received; the API will query issuer and broker records to automate entry or denial.
For 2021, the majority of VSM providers will use APIs that have been developed by Mediant in collaboration with platform providers in the Subcommittee, including Computershare and Equiniti. A second set of APIs, developed by another VSM provider, will also be used. Two APIs will result in some inconsistencies in the experience:
- The majority of the Subcommittee and its co-chairs agreed that the best experience for issuers and owners is gained through an API that creates a digital legal proxy. This approach, now being adopted by the majority of VSM providers, provides issuers with the name of the beneficial owner along with their voting entitlement, regardless of the electronic validation process used.
- The alternative solution still enables beneficial holders to participate in meetings hosted by other VSM providers. However, it may require them to self-identify to gain access. Voting will be separately managed with results sent to a tabulator within several hours.
- The Subcommittee agreed to defer discussions to resolve these inconsistencies in the interests of having a solution in time for the 2021 proxy season. It will review the performance of the APIs and reconvene after the 2021 season to debate harmonization for 2022.
- Mediant, Computershare, and Equiniti will implement their APIs on or after March 1, 2021. Other VSM providers are expected to follow suit.
Digital Legal Proxy Creates Access for All
The API designed by Mediant can be used by all VSM providers. It conveys all records needed to create a digital legal proxy: the beneficial holder’s name, address and/or email address, number of shares, and Depository Trust Company participant number. It also includes records of whether and how the beneficial owner may have voted.
A digital legal proxy unlocks greater flexibility in how access and voting rights can be managed in VSMs, exceeding what is possible at in-person meetings. The API not only admits beneficial owners to the meeting but can cancel any previous vote when they cast a vote during the VSM. Post-meeting reconciliation ensures that no over-voting occurs and, unlike the physical legal proxy process, if a beneficial owner doesn’t cast a vote at the VSM, any previous vote will be sustained.
Industry Collaboration Will Continue
The ongoing pandemic means that virtual-only meetings will again be the norm in the upcoming proxy season. Industry coordination, especially on the digital legal proxy initiative, will substantially improve the VSM experience for beneficial owners.
Although further work is needed to harmonize the industry’s approach to APIs, the Subcommittee has shown that providers are ready to align and move fast in response to the concerns of shareholders. This collaborative approach will continue, with further improvements expected for the 2022 proxy season.
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