AB: Governance Matters - The Proof Is in the Proxy - Seite 2

When we surmise a company's governance practices aren't supporting our clients' best interests, we may vote against management to signal our objection. For instance, seeing internal accounting problems, we may record our opposition to the chair of the audit committee; if executive compensation is misaligned with performance, we vote against it. Some governance issues may warrant a stance against the specific board member(s) responsible-also known as an "accountability vote."

Entered into Evidence, Thousands of AB Proxy Votes

Within this backdrop, our study retraced approximately 34,000 shareholder meetings, consisting of votes on more than 266,000 individual proposals across global firms from 2018 through 2022. Then, we linked each proxy vote to the company's total stock return the following calendar year.

To help categorize our degree of alignment with management, we grouped the companies into equal-weighted baskets based on our number of votes against management (VAMs). For example, zero VAMs may reflect stronger alignment based on what we believe is sound governance and oversight across the firm. One VAM indicates a single "no" vote on any of the proposed matters, from capitalization and audits to compensation and director elections. Two VAMs reflects our disapproval on two such measures and so forth.

Zero VAMs occurred in 45% of all shareholder meetings during the period, which means we pushed back-whether on minor issues or proposals of greater consequence-a majority of the time. This reflects our rigorous standards and desire to improve upon the status quo. Multiple VAMs can be vital to voice material concerns, especially if a firm's governance has been a growing issue for several years.

We found that zero-VAM companies-those we fully supported-outperformed those in the other VAM baskets by at least 250 basis points per year. We observed this general trend among similarly sized peers and across most-but not all-sectors and regions. For the five-year period, the average annualized return for zero-VAM companies was 11.5%, almost double that for companies in the three+ VAM basket (Display).

Mind over Matter-Proxy Voting Should Be Thoughtful

Proxy voting should be more than a compliance exercise. It's a fundamental tool in active management, empowering investors to sway companies from pitfalls that can impede long-term performance. In matters of governance especially, we've found that well-thought-out proxy votes can make a positive impact on important business decisions, from leadership and disclosures to compensation and capitalization.