Responsible Investment Requires a Proxy Voting System Responsive to Retail Investors

Abstract

There is growing awareness amongst retail investors of the importance of environmental, social, and governance (ESG) factors to the performance of their stocks. The same factors impact their lives from a broader societal and economic perspective. Institutional investors have incorporated ESG issues into their proxy voting and corporate engagement. Retail investors who invest in stocks directly have the same voting rights, and collectively a similar power, but data shows that their voting rates have declined precipitously over the past forty years. This chapter traces the history of property rights and proxy voting, examines them within the current regulatory context, and posits that economic rights have been well protected but ownership rights have been neglected. An established framework for stages of capitalism is re-imagined, situating retail investors’ disengagement from the proxy process and highlighting suggestions to regulators for addressing the proxy voting gap.