* Moxy Vote launched in 2009, drew 200,000 users
* Co-founder Schlegel cites fees and complex voting rules
By Ross Kerber
July 10 (Reuters) – Shareholder voting service Moxy Vote
said it will shut down on July 31, ending a pioneering effort to
give ordinary investors more say in how companies are run.
The West Chester, Pennsylvania, company said on Tuesday it
was losing money amid complex rules governing how companies
interact with retail shareholders.
In the wake of the financial crisis, governance specialists
hoped mom-and-pop investors would press companies to become more
accountable. Along with Moxy Vote, other new on-line efforts
include proxydemocracy.org and sharegate.com.
All aim to help small investors become better overseers of
their assets, such as allowing them to track the annual proxy
elections where corporations chose directors and seek approvals
for executive pay. Frustrated shareholders staged several
revolts in the just-ended spring proxy season, such as rejecting
the pay package of Citigroup Inc Chief Executive Vikram
Pandit in April.
But now the on-line efforts look challenged themselves. In
an interview, Moxy Vote co-founder Mark Schlegel said his
10-person startup faced two main problems as it tried to make
its website as a place for investors to vote their shares.
First, some brokerage companies would not pass along
shareholder ballots, saying they would do so only when required
by U.S. Securities and Exchange Commission rules. Also, proxy
agents have charged Moxy Vote significant fees that public
companies would not reimburse.
Both problems became too much for the three-year-old
company, Schlegel said, even though it had about 200,000
registered users and was growing quickly.
“The headwinds were too strong for us. Until the regulatory
environment changes, it’s going to be a tough go for anybody
like a Moxy Vote,” he said.
CLOSE-KNIT SECTOR
Large brokers that worked with Moxy Vote included E*Trade
Financial Corp and TD Ameritrade Holding Corp,
Schlegel said. He declined to name the brokerage firms that did
not pass along ballots and said Moxy Vote received a lot of help
from the close-knit proxy industry, where Moxy Vote’s shutdown
quickly drew notice.
“It is no easy matter to engage large numbers of retail
investors in corporate governance and proxy voting and Moxy Vote
is to be commended for its efforts,” said Chuck Callan, senior
vice-president at Broadridge Financial Solutions Inc. It
is the largest provider of proxy services for investors who own
shares through brokerage accounts.
Broadridge’s role can put it at odds with transfer agents
that help companies communicate directly with investors. But
Charles Rossi, president of a transfer-agent trade group, also
praised Moxy Vote’s efforts.
“Because of the system we operate under, it’s unfortunate to
see Moxy Vote fail,” said Rossi, who is also an executive
vice-president of services firm Computershare in Massachusetts.
Proxy voting has various overseers, including the U.S.
Securities and Exchange Commission, stock exchanges and FINRA,
and several reviews are under way on how to improve the
cumbersome system.
An SEC spokeswoman did not respond to questions about Moxy
Vote. Current rules left Moxy Vote in limbo and unable to pay
bills it ran up processing votes, said James McRitchie,
publisher of the corpgov.net website and an informal adviser to
Schlegel.
“The more successful Moxy Vote was at getting people to vote
on their platform, the more money they lost,” he said.
KEY SWING VOTES
Retail shareholders often own less than 20 percent of a
typical company’s stock, but they can provide key swing votes in
close proxy contests.
Backed by private investors, Moxy Vote aimed to gather small
investors to help them study up for corporate contests.
To make money, Moxy Vote charged institutions with an
interest in reaching smaller investors, such as to lobby for
their votes. Clients included public companies, activist hedge
funds and pension funds.
The company’s website, moxyvote.com, grew quickly from just
5,000 registered users a year ago and attracted some
advertising. But it failed to gain the scale to pay its bills,
Schlegel said. The shutdown decision was hard after investors
put $4.5 million into the company, but inevitable because of the
slow pace of regulatory change, he said.
Some venture-capital backing came from principals of TFS
Capital, a registered investment adviser, according to Moxy
Vote’s website.
Schlegel said the firm might continue some aspects of its
service and praised other online efforts still under way to
engage shareholders.
“Everybody has pushed the ball a little further down the
field and I hope we’ve done that as well,” he added.
