Proxymity, a three-year-old startup headquartered in London, took a critical step toward its goal of modernizing proxy voting and launched in the U.S. on Thursday.
The company, which spun out of Citibank in 2020 and is backed by most of the largest custody banks, including Citi, BNY Mellon, State Street and J.P. Morgan Chase, said the addition of North American markets (it is also launching in Canada) was necessary for a business like theirs. Public companies might be domiciled in one place but have shareholders all over the world they need to communicate with. To win the issuers as customers, services like Proxymity and others must be global and the giant pool of publicly traded companies in the U.S. is one of the most important components.
“It’s not a service unless I can offer every meeting in France, or every meeting in Australia, or every meeting in Belgium, and the meetings that everybody wants to vote for are predominantly here in North America,” said Jonathan Smalley, the co-founder and chief operating officer at Proxymity who is based in New York.
“Getting live in the U.S. was a big thing for us. But we felt it was the right strategic move to do that after we proved the platform in Western Europe and in Australia and New Zealand, which we’ve done,” he said.
Proxymity is now serving more than 25 markets world-wide. Before the North American launch, it covered more than 3,150 board of directors meetings annually. More than $185 billion worth of shares have used the platform to cast over 215,000 votes to determine things like company policies, new members of a board of directors, and director compensation. The young 200-employee company is off to a great start, Smalley said, but it still has a small market share and a lot of opportunity. There are more than 50,000 meetings a year in more than 100 countries.
Mediant, an investor communications technology company and investor in Proxymity, collaborated with the startup on the launch of its Vote Connect product in North America.
“Our decision to invest in Proxymity in 2022 and power its Vote Connect Total solution in our local markets showcases the best mix of financial innovation and service delivery excellence. We’re leveraging the strengths of both organizations to radically improve the experience for custodians, other financial intermediaries, and shareholders,” Sherry Moreland, President at Mediant, said in a statement.
Digitally connecting companies with intermediaries and shareholders in real time is a recent development in a corner of financial services that has been slow to meaningfully evolve, Smalley says. Right now, in many markets, the proxy voting process is complex and manual, resulting in poor transparency. It’s also slow and expensive (the Securities and Exchange Commission requires all companies to send documents to shareholders, an expense that could be in the millions of dollars). As a result, investors sometimes have tight deadlines to do research and make informed votes. Once they do vote, they send forms in the mail and don’t get confirmation that their vote has been tallied.
Proxymity isn’t the only firm working on a digital solution. Broadridge, a dominant force in investor communications for decades, also announced the international launch of its own “next-gen digital communications platform” on Sept 13.
Smalley argues that in the future, fully digital solutions won’t just be nice to have, they will be necessary because institutional and retail investors (Proxymity partnered with BlackRock last year to help power its Voter Choice platform) are increasingly interested in voting on corporate decisions.
“I do have concerns that the current ecosystem is just not going to be able to cope sufficiently well enough,” Smalley said. Overvoting, under-voting and other issues can be hard to detect or prevent, and costly. In 2016, T. Rowe Price unintentionally voted in favor of a $25 billion buyout of Dell Inc., an error that cost the firm almost $200 million.
“When you have that irregularity, as we see from time to time, it’s incredibly expensive and messy and I just don’t think we should be having any irregularities in voting in 2023. It’s too important and we’ve got the technology,” Smalley said.