The Value Of Voting

Proxy voting is your chance to have a say in the management of the companies you invest in

You might call Dr. Henry S. Williams AT&T’s less-than-silent partner. The 72-year-old retired radiologist monitors the company from his Beverly Hills home. He voted for the wireless spin-off and has a hand in making several other decisions, including how chairman and CEO C. Michael Armstrong should be compensated. Williams, like all investors, is entitled to do all this simply because he owns stock in the company. He exercises these privileges because he takes advantage of a valuable process that many investors typically ignore: proxy voting.

Once a year, companies send shareholders proxy statements and a ballot along with their annual reports, in effect allowing investors to vote on how the company should be run (through the board of directors who represent them) without investors having to attend shareholder meetings. Proxy statements typically cover at least two issues: election of the board of directors and a vote for an outside auditor. Other issues include management compensation, stock splits and stock option plans, and, occasionally, social and environmental concerns. “Proxy voting is part of your right as a shareholder and is considered by some to be a part of the asset of the stock,” says Ann Yerger, director of research at the Council of Institutional Investors, an association of pension funds in Washington, D.C. “It’s a way for investors to make a difference.”

Williams began investing in 1949 and has been voting by proxy for over 40 years. Like many investors, he reads the Wall Street Journal, watches CNBC, and keeps abreast of new developments concerning his companies. What makes him unique is the amount of time he spends gathering information — about four hours every day. “If you have money invested, then you ought to read about your company so that you know what’s going on,” he says.

For example, Williams was concerned about AT&T selling its broadband division, which would lower the value of his stock. Unwilling to wait for a deal to be finalized, he sold his broadband shares. Part of Williams’ strategy is simple: he will stick with a company as long as he agrees with management’s proposals, and sell when they make decisions he deems unprofitable.

Many investors ignore proxies, often citing lack of time for filling them out. But by not voting, an investor is casting a vote for management, and the decisions made are not always in the shareholder’s best interest. “Companies make it very easy to just sign proxies over to them,” says Williams. That should not be the case, as proxy voting is a simple process and one that embodies DOFE Principle No. 2: to be a proactive and informed investor.

READ ANNUAL REPORTS AND KEEP ABREAST OF COMPANY DEVELOPMENTS
“Successful investors always read the annual report,” says Williams. “In fact, you should read past reports even before buying stock.” Deborah Pastor, a vice president at eRaider .com, a site that uses Internet message boards to lobby for shareholder rights, suggests that investors keep up on social issues as well as business news.

KEEP YOUR INVESTMENTS MANAGEABLE
Williams never owns stock

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