A recent US development has put retail voting back on the board agenda: the United States Securities and Exchange Commission has granted ExxonMobil no‑action relief for a program that lets retail shareholders give standing instructions for their shares to be voted in line with the ExxonMobil board’s recommendations, with opt‑in, opt‑out and case‑by‑case override protections preserved for investors.
Participants in the program continue to receive meeting materials, are provided with annual reminders, and may exclude “special situations” such as contested elections and votes on M&A transactions from their standing election, addressing concerns about shareholder discretion on significant matters. The program is open to registered and beneficial owners and is free for investors, but excludes investment advisers voting client assets, reflecting its retail focus.
What is the benefit for issuers?
Historically, retail turnout lags institutions; ExxonMobil reported roughly three quarters of retail‑held shares went unvoted at its last AGM, despite retail holding nearly 40% of the register. Higher retail participation can stabilise outcomes on routine items, potentially lowering proxy solicitation costs, while leaving shareholders free to override on a meeting‑by‑meeting basis. For transactions, the ability to carve out contested elections and M&A transactions mitigates concerns about ‘locking in’ board support on pivotal votes.
What are the considerations?
The practical challenge is execution and risk. Companies will need lead time to coordinate with registry and technology providers, build secure enrolment portals and deliver robust website and proxy disclosures -costs and complexity that boards should weigh against expected engagement gains.
Consideration will also need to be given to the potential that the issuer obtains a relevant interest in its own securities (noting that the exception to the relevant interest test for proxies only applies where the appointment is for one meeting only) and association risks.
Market reception is also evolving - proxy advisers and institutions have yet to settle a view,[1] and some ESG funds have challenged the approach - so early shareholder engagement and clear communications are critical.
Should you think about implementing a retail voting program?
For issuers with meaningful retail registers - including those facing tight member‑approval dynamics where turnout can be decisive - this is a development to watch and, where feasible, pilot thoughtfully.
The City of Hollywood Police Officers’ Retirement System has filed a proposed class action on behalf of ExxonMobil shareholders against the company and its board, alleging that they are breaching their fiduciary duties in connection with the company’s adoption of its retail voting program.
