Investing app drives shareholder equity: eToro allows investors to own company boards of directors to account for proxy voting advantage
- eToro has partnered with Broadridge to offer proxy voting
- It will initially be for US-listed stocks before being offered to include global stocks
- eToro users who own partial shares will also be allowed to vote
Millions of other retail investors will be able to give their opinions on how to run the companies they invest in as eToro allows proxy voting to its users, that’s what can be revealed.
The DIY investment platform, which has skyrocketed in popularity since the pandemic, has partnered with Broadridge Financial Solutions to bring proxy voting to 30 million customers worldwide.
eToro now boasts over 3 million registered users and half a million funded accounts in the UK alone, opening its annual general boards to a much larger group of investors.
eToro has partnered with Broadridge to allow its users to exercise their voting rights
“Retail investors haven’t always got the platform, the voice and the support they deserve, but that is changing fast, and retail investors’ access to proxy voting is a crucial step in this journey,” said Yoni Asia, CEO and co-founder of eToro.
“There is clearly a strong appetite among retail investors to participate in the AGM and we look forward to seeing how eToro clients interact with this new feature.”
Legacy platforms like AJ Bell, Interactive Investor, and Hargreaves Lansdown already offer this service to their users.
However, Hargreaves Lansdown currently does not allow voting on US holdings. This is because the shares are typically packaged in a vehicle called Crest Depository Interest, which displays overseas securities.
US CDIs maintained through Hargreaves do not have voting rights.
However, eToro says its investors will not order stock packages in CDI indices until they can buy them and exercise their voting rights. Alternatively, they can buy US securities directly for one.
Proxy voting for stocks listed on US stock exchanges will begin later this month, followed by voting on stocks listed on other stock exchanges. Investors will also be able to participate in the companies’ 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 proxy voting?
The votes are aggregated and weighted based on the number/portion of shares that an eToro user holds in the shares.
For example, if two eToro users who own 0.5 shares of Apple vote for a particular move, this will be one vote that can be passed to Apple.
If ten users with 0.1 Apple share vote for the same move, that would be one vote.
The final number of votes should generally be an integer because most issuers are listed in Delaware indicating 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.
“It’s great to see companies taking steps to improve shareholder democracy, and we look forward to seeing others in the industry follow suit,” said Keri Layton-Bailey, director of shareholder engagement at Lumi.
However, there is still a long way to go until retail shareholders are truly involved in annual general meetings (AGMs). While many retail investors will now be able to vote on key issues, the vast majority of them are still unable to attend AGMs.
The process for individual retail shareholders to attend a general meeting is still complex, takes place through a large medium, and is often paper-based. This makes exercising voting rights and attending a general assembly meeting a long and difficult process, as many shareholders cannot obtain the paperwork needed to get to the meeting.
The vast majority of UK shareholders want to attend the AGM but nearly half are excluded due to the complex share ownership system, according to a survey by LOMI.
eToro’s survey of its clients shows that the majority of individual investors want to be part of the company’s decision-making process, with three out of four willing to vote at the AGM.
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 to 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 like to vote on the most, dividends came first with 49 percent of respondents, followed by CEO salaries at 33 percent, and 28 percent wanting to vote on the company’s climate strategy.
Asia added: ‘In the past few years, we’ve 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 their say in corporate decision-making at many of the world’s largest companies.
“This is a milestone in the retail investor’s story and could have a lasting impact on the business world.”
More and more platforms are starting to allow individual investors to vote at annual shareholder meetings. Last week, BlackRock announced that UK investors will be able to vote on the underlying shares they hold through select funds next year.
Vanguard will also begin a trial next year to give US investors in some of its index funds a chance to vote at the annual general meeting.
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