The investment app drives shareholder equity forward: eToro allows investors to own company boards to account for the proxy voting feature
- eToro has partnered with Broadridge to offer proxy voting
- It will initially be for US-listed equities before being rolled out to include global equities
- eToro users who own partial shares will also be allowed to vote
Millions of other retail investors will be able to give their opinion on how the companies they invest in are run as eToro allows proxy voting for its users, and this is what can be revealed.
The DIY investing platform, which has soared in popularity since the pandemic, has partnered with Broadridge Financial Solutions to bring voting by proxy to its 30 million customers worldwide.
eToro now boasts over 3 million registered users and half a million funded accounts in the UK alone, opening AGMs to an even wider group of investors.
eToro has partnered with Broadridge to allow its users to exercise their voting rights
“Retail investors have not always received the platform, voice and support they deserve, but that is changing rapidly, and retail investors’ access to proxy voting is a critical step in this journey,” said Yoni Asia, eToro CEO and Co-Founder.
“There is clearly a great interest among retail investors to participate in the AGM and we look forward to seeing how eToro clients react to this new feature.”
Legacy platforms such as AJ Bell, Interactive Investor, and Hargreaves Lansdown already offer this service to their users.
However, Hargreaves Lansdown does not currently allow voting on US holdings. This is because shares are typically packaged into a vehicle called Crest Depository Interest, which displays offshore securities.
US CDIs maintained through Hargreaves do not have voting rights.
However, eToro says its investors will not require bundles of shares in the CDIs so they can buy them and exercise their voting rights. Alternatively, they can buy US securities outright for one.
Proxy voting for stocks listed on US stock exchanges will start later this month, followed by voting for stocks listed on other stock exchanges. Investors will also be able to participate in corporate voluntary actions in the coming months.
How will voting work for investors who own fractional shares?
eToro investors can own fractional shares, i.e. when you own less than a full stake in the company.
They allow retail investors to invest based on a set amount.
How does this work when it comes to voting by proxy?
Votes are aggregated and weighted based on the number/part of shares held by an eToro user.
For example, if two eToro users who own 0.5 shares in Apple vote for a particular move, that would be one vote that could be passed on to Apple.
If ten users holding 0.1 shares in Apple vote for the same move, that would be one vote.
The final number of votes should generally be an integer number because most of the issuers are listed in Delaware which indicates that only full shares are the owners of the company.
This means that the final number of votes will be rounded to an integer.
There have been claims that while DIY investing apps have helped democratize access to investing, investors are still left out of key decisions.
Kerry Leighton-Bailey, Director of Shareholder Engagement at Lumi, said: “It’s great to see companies make steps to improve shareholder democracy, and we look forward to seeing others in the industry follow suit.
However, there is still a long way to go until retail shareholders are truly included in annual general meetings (AGMs). While many retail investors will now be able to vote on key issues, the vast majority are still unable to attend AGMs.
The process for individual retail shareholders to attend an AGM remains complex, and takes place through a large, often paper-based intermediary. This makes exercising voting rights and attending the General Assembly meeting a long and difficult process, as many shareholders are unable to obtain the necessary papers to access the meeting.
The vast majority of UK shareholders would like to attend an AGM but nearly half are excluded due to the complex share ownership system, according to a survey by Lummy.
eToro’s survey of its clients showed that the majority of individual investors want to be part of the company’s decision-making process, with three out of four wanting to vote at AGMs.
The data shows that younger investors are much more likely than older investors to say — 80 percent of 18-34-year-olds would vote at the AGM if given the opportunity, compared with 65 percent of those over 55.
Those who had been investing for three to five years were more likely to vote — 79 percent — while investors with more than 20 years of experience were less likely to vote — 65 percent.
When asked which issues they would most like to vote on, dividends came out on top with 49 percent of respondents, followed by CEO salaries at 33 percent, and 28 percent wanted to vote on a company’s climate strategy.
Asia added, “In the past few years, we have seen an explosion in the number of retail investors. This group has the potential to have a significant impact on the financial markets. Thanks to our partnership with Broadridge, eToro users can now have a say in corporate decision making at many of the world’s largest companies.
“This is a milestone in the story of the retail investor and could have a lasting impact on the business world.”
More and more platforms are starting to offer individual investors the opportunity to vote at annual shareholder meetings. Last week, Blackrock announced that UK investors will be able to vote on the underlying shares they own through select funds next year.
Vanguard will also begin a trial next year of giving US investors in certain equity index funds the opportunity to cast their votes at annual general meetings.
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