Thursday, July 12, 2012

Day 23 - Regulate US

I subscribe to a multitude of things, mostly politically motivated.  I get emails from CREDO, MoveOn, Change, GreenPeace, etc.  I had also subscribed to one that I thought was very interesting called Moxy Vote.

If you are unfamiliar with Moxy Vote, I will give you a brief summary.  Corporations are big things with shareholders, chairmen, boards, etc.  The idea is that the shareholders get to, democratically, decide on various things, such as pay increases and I believe appropriations of certain funds and such.  In any event, it is supposed to function like a small Democracy.  Moxy Vote was setup to allow share holders to electronically vote on issues for the company AND allowed outsiders to express their opinion to these companies as well.  The thought, then, is that the board members could follow the votes of their shareholders on all fronts AND take into consideration the people the utilize their services (non-shareholder consumers).

Now, I don't know about you, but to me this seems like a pretty invaluable tool.  Additionally, this was at no cost to the company.  If a company was truly interested in what its shareholders and consumers wanted, they should be praising this little service, right?

Apparently, that isn't the case.  You see, there is no forced requirement that a company needs to disclose items that are up for vote to anybody.  Unlike the Government, companies can keep their voting agendas private and for their shareholders only.  I'm sure there is some mixed feeling on this, but there is never a reason to not be transparent unless you are trying to hide something.  Additionally, I don't think anyone would be shocked to know that board members are not always concerned about the shareholder or consumer's best interests (I'm not saying all companies are like this, just saying there are certainly some).

Well, that is exactly what turned out to be the case.  Most companies told Moxy Vote that they would absolutely not allow a digital shareholder voting system unless the government created and enforced regulation requiring them to publicly release their voting agendas for the company.

This, people, is why regulation is absolutely necessary.  A company is focused on making money, that is how they thrive.  If they don't HAVE to do something they won't.  Many will claim ignorance, ones with vast cash will even buy "scientific" panels to discredit claims (such as food industries, tobacco industries, etc).  This for me was just another sad day in expecting companies to do the right thing without being forced to do it.  Anyway, below is the email I received from Moxy Vote:

Dear Friends of Moxy Vote,

It is with great disappointment today that I announce the closing of Moxy Vote. Our last day of business will be July 31, 2012. At this time, we want to thank all of our clients, friends and business partners that have supported us since our launch in 2009. Although we accomplished a great deal, we leave with a sense of disappointment at not being able to fully realize our vision for Moxy Vote. While we hope to revive Moxy Vote at some point in the future, we must first focus on regulatory change if Moxy Vote, or any individual investor-focused proxy voting platform, is to succeed. 

It is important for us to state that we did not arrive at this decision easily. We recognize that this step is disruptive to our employees, clients and business partners who had committed time and energy to building relationships with us. We entered into many of these relationships with great uncertainty around our product offering and value proposition, and we are forever grateful to all those who took a chance on us. We are not a group of people who walk away from a challenge and appreciate the trust offered to us by many. Moxy Vote fought hard to make its business model a success. In fact, we invested over $4.5 million dollars in our operations since inception – all to advance a mission of engaging individual investors and improving proxy voting. Although the Moxy Vote website,, will be shut down on July 31, 2012, we plan to continue to engage regulators and policy makers in an effort to blaze a trail for future "Moxy Votes."

It seems appropriate at this time to explain our rationale for closing. The simple answer is that we were unable to make any tangible progress on several key barriers to our success. These obstacles have been known for some time. In fact, we documented them very clearly nearly two years ago in our response to the Securities and Exchange Commission's request for public comment on its publication entitled Concept Release on the U.S. Proxy System. For those that are interested, our comments can be read here.

In summary, our efforts thus far lead us to conclude that there are two primary obstacles that will prevent any individual investor-focused proxy voting websites from being successful. They are the following:

  1. Individual shareholders have no legal grounds to compel their brokers to deliver ballots electronically to internet voting platforms. And, unfortunately, many brokerage firms have stated clearly to us that they will send them only when required to do so by regulators.
  2. Proxy distribution/collection agents are presently charging significant fees to internet voting platforms for vote collection – a fee that should be paid by public companies and one that proves substantially more burdensome to individual voters than institutional voters.
We have been working diligently on our business model since 2007 and the same two issues that were identified in our early analysis are still present. The unfortunate conclusion we have recently made is that the mere existence of our site and growth in our user-base is not expediting regulatory change. Rather, it appears that regulatory change can be achieved only through steady plodding over a period of many years. We appreciate the assistance given by many individuals at the U.S. Securities and Exchange Commission, the New York Stock Exchange and the Financial Industry Regulatory Authority in helping us to reach this conclusion. It's not sustainable for Moxy Vote to keep its operations alive while it seeks resolution on these issues, given that both must be addressed to generate the user growth needed to achieve profitability. We are disappointed that we were not able to resolve these issues.

One issue that is noticeably absent from our list is individual investor apathy. For many years, one of the leading arguments for the lack of meaningful participation from individual investors is that they simply do not care. While this statement may have been true historically (and for many good reasons!), the internet is revolutionizing citizen and investor engagement. The internet has enabled individuals to unite and thereby wield enormous influence. For example, one doesn't have to look further than the social activism efforts facilitated by and, among others, to realize that citizen engagement is broad and effective. Moxy Vote brought this same concept to investor engagement and proxy voting. For example, below are a few of Moxy Vote's accomplishments:

  • 197,000 subscribers to Moxy Vote's content e-mails
  • 56 leading advocate organizations posting voting advice on
  • 30,000,000 shares voted (intelligently!) using this advice through
  • 64 "Letters to Management" sent by Moxy Vote readers
  • 275,000 signatures, in aggregate, on the Letters to Management
In summary, we should not blame the individual investors. The investors are ready to engage when the policy makers are ready to give them a fair opportunity.

I want to conclude by reiterating that we are not giving up the fight for individual investors. We plan to continue to engage regulators and policy makers to ensure that individual investors are given the same opportunities as institutional investors. Moreover, given our success in certain areas, we are actively engaged in discussions with outside firms that have shown an interest in continuing various aspects of our service. Many areas of our business model showed positive results but, given our focus on improving proxy voting as a key area of engagement, we do not desire to pursue these other opportunities. 

We encourage the rest of you to continue with your own efforts and to share these key issues with policy makers if given the opportunity. Moreover, if we can be of assistance in helping you overcome similar obstacles, please let us know. Progress is being made, albeit more slowly than many of us would like, and we can all look forward to continued improvements in the future.

Best regards on behalf of the entire Moxy Vote Team,

Mark F. Schlegel
Co-Founder, Moxy Vote LLC

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