Shareholder Activism

Shareholder activism is an important way to address the principal-agency problems of listed companies. Unfortunately, minority shareholders (most of them are retail investors) are not so "active" in questioning the corporate governance matters. They would rather sell their shares upon disappointment with the company performance.

As institutional investors, fund managers are more qualified to vote for/against listed companies' major decisions. However, many of them are still inactive. The primary reason is that they don't want to jeopardize existing or potential client relationships with those listed companies (which may become their institutional clients). The situation is even worse if the fund managers are part of a financial group with investment banking business.

So how can fund investors resume control over listed companies which they benefically own via their funds? I've recently read an article published in CFA Institute's journal, which mentions an interesting idea: proxy exchange. That means, fund investors are assigned by their fund managers to vote the listed shares held by the funds. If the fund investors don't want to vote, they can transfer their voting rights to others via a website operating as an online proxy exchange.

Under this system, those "stock market heros" (like David Webb) can launch a campaign to collect the proxy rights from dissented shareholders to vote against a listed company.

The idea of proxy exchange sounds fantastic but I doubt of the feasibility. People buying funds typically do not want to bother about individual stocks. Would they have any interest to participate in the proxy exchange activities?