Dividends and Shaping the market for purposeful investing

One of the advantages of investing in a company is to vote for management compensation, the auditor and management concerns at the annual meeting. Every company spends a great deal of time and effort at the annual meeting and shareholders can ask questions. It is something you can do and something you should do.

In an article by Edward Waitzer and Toby Heaps, the make up of the biggest owners is changing. According to a Havard study, 3 companies hold 1/10 of the the world’s securities are have $19 billion under assets. The 3 companies are BlackRock, Vanguard and State Street. In 1998, they held 5.2%, in 2017 it was 20.5 % and if trends continue the number will be 40% by 2040.

The 3 companies are beginning to be more visible in attempting to influence corporate conduct. If you were on the Board of the companies, ensuring the management recommend votes is very important to the annual meeting. If the Board were to ensure the big 3 voted in their favor, along with other institutional investors doing the same, votes would very easily pass.

The authors explained passive investment is not neutral and what the companies say they are going to do, what timeline they give to the company and how they vote can be a mismatch. The issue is many people give the funds the vote by default, sometimes it should not be that way.

Linking to dividend paying companies, the large index companies hold all these companies in their indexes and likely will vote for the management 999 out of 1,000 times, and maybe more. As an investor you are concerned about continuing to be profitable and pay a dividend, but similar to people around the world, you might want to ensure the company has your values and is increasing them. You picked the company for a reason, besides it is profitable, maybe because you think it can be leader in making the world a better place. Ask at the annual meeting.

There are more questions than answers, till the next time – to raising questions.

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