Investing app pushes forward shareholder rights: eToro allows investors to hold company boards to account with proxy voting feature
- eToro has partnered with Broadridge to introduce a proxy voting feature
- It will initially be for US-listed stocks before rolling out to include global stocks
- eToro users holding fractional shares will also be allowed to vote
Millions more retail investors will be able to have their say on how the companies they invest in are run as eToro enables proxy voting for its users, This Is Money can reveal.
The DIY investment platform, which has soared in popularity since the pandemic, has partnered with Broadridge Financial Solutions to bring proxy voting to its 30million customers worldwide.
eToro now boasts more than 3million registered users and half a million funded accounts in the UK alone, opening up AGMs to an even larger pool of investors.
eToro has partnered with Broadridge to allow its users to exercise their voting rights
Yoni Assia, eToro CEO and co-founder said: ‘Retail investors have not always been given the platform, the voice and the support that they deserve but this is rapidly changing and retail investor access to proxy voting is a crucial step in this journey.
‘There is clearly a huge appetite amongst retail investors to participate in AGMs and we look forward to seeing how eToro clients engage with this new feature.’
Legacy platforms like AJ Bell, interactive investor and Hargreaves Lansdown already offer this service for their users.
However Hargreaves Lansdown does not currently allow voting on US holdings. This is because the shares are usually packaged into a vehicle called Crest Depository Interest, which gives exposure to an overseas security.
The US CDIs that are held through Hargreaves do not have voting rights.
eToro, however, says its investors won’t require shares to be packaged up into CDIs to be able to buy them and exercise voting rights. Instead they can directly buy US securities one for one.
Proxy voting for stocks listed on US exchanges will go live later this month, followed by voting for stocks listed on other exchanges. Investors will also be able to participate in voluntary corporate actions in the coming months.
How will voting work for investors holding fractional shares?
eToro investors can hold fractional shares, which is when you own less than a whole share fo a company.
They allow retail investors to invest based on a set amount.
How does this work when it comes to proxy voting?
Votes are aggregated and weighted depending on the number/fraction of shares that an eToro user holds in a stock.
For example if two eToro users holding 0.5 shares in Apple voted FOR a particular motion, then this would amount to one vote which could be passed onto Apple.
If ten users with 0.1 shares in Apple voted FOR the same motion, this would equal one vote.
The final number of votes will generally need to be a whole number as most issuers are incorporated in the State of Delaware which indicates that only full shares are owners of the company.
This means that the final number of votes will be rounded down/up to a whole number.
There have been claims that while DIY investing apps have helped to democratise access to investing, investors are still being locked out of key decisions.
Kerry Leighton-Bailey, director of shareholder engagement at Lumi said: ‘It’s fantastic to see businesses introducing steps to improve shareholder democracy, and we’re looking forward to seeing others in the industry following suit.
‘However, there is still a long way to go until retail shareholders are truly included in annual general meetings (AGMs). Whilst 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 is still complex, highly intermediated and often paper based. This makes exercising voting rights and attending the AGM a lengthy and difficult process to navigate, with many shareholders simply unable to obtain the necessary paperwork to access the meeting.
The vast majority of UK shareholders would like to attend an AGM but nearly half are excluded because of the complex share ownership system, according to a survey by Lumi.
eToro’s own survey of its customers reveals the majority of retail investors want to be part of the corporate decision-making process, with three in four wanting to vote in AGMs.
The data shows younger investors are significantly more likely than older investors to want a say – 80 per cent of 18- to 34-year-olds would vote in an AGM if given the chance, compared to 65 per cent of over 55s.
Those who have been investing for between three and five years were most likely to vote – 79 per cent – while investors with over 20 years’ experience were least likely to vote – 65 per cent.
When asked what issues they’d most like to vote on, dividends came out top with 49 per cent of respondents, followed by executive pay at 33 per cent, and 28 per cent want to vote on a company’s climate strategy.
Assia added: ‘In the last few years we’ve seen an explosion in the number of retail investors. This group has the potential to have a major influence on financial markets. Thanks to our partnership with Broadridge, eToro’s users can now have their say in the corporate decision making at many of the biggest companies in the world.
‘This is a huge milestone in the retail investor story and one that could have a lasting impact on the business world.’
More and more platforms are starting to offer retail investors the opportunity to vote in annual shareholder meetings. Last week, Blackrock announced UK investors will be able to vote on the underlying shares they hold via select funds next year.
Vanguard will also begin a trial next year to give US investors in some index equity funds the opportunity to cast votes at AGMs.