Delegated Corporate Voting and the Deliberative Franchise

Abstract

Starting in the 1930s with the earliest version of the proxy rules, the SEC has gradually increased the proportion of “instructed” votes on the shareholder’s proxy card until, for the first time in 2022, it required a fully-instructed proxy card. This evolution effectively shifted the exercise of the shareholder’s vote from the shareholders’ meeting to the vote delegation that occurs when the shareholder fills out the proxy card. The point in the electoral process when the binding voting choice is communicated is now the execution of the proxy card (assuming the shareholder completes the card without error); proxyholders merely transmit the shareholder’s instruction as a formality.

This shift is more significant than generally recognized, because, as this Essay explains, it restores the potential for deliberative shareholder governance to the large, publicly-held corporation. Furthermore, the shift has occurred at a moment in history when technologies exist to facilitate new processes of deliberative shareholder governance. Market actors now are leveraging technology to create such innovations as pass-through voting and advance voting instructions, and academic support is building for new rules that would require intermediaries to provide their beneficial holders with choice infrastructure. This is the realization of the New Deal project to make shareholder preference-satisfaction the crux of the shareholder franchise, and it holds real promise to move corporate governance beyond shareholder wealth maximization.