The number of shares you own determines how many votes you have. Most companies allow one vote per share of
common stock.
So the larger your holding of a single company's stock, the greater your voting influence. If you own 500 shares of Company X, which has 2.5 billion shares outstanding, you have only .0002% of that company's shares. That gives you just .0002% of the shareholder vote.
For this reason, most individual investors have little impact
on company policy, while
institutional investors,
including pension and mutual funds, have much greater potential influence.
Cumulative voting
To give individual shareholders more influence, some companies allow
cumulative voting
for directors. In cumulative voting, rather than voting yes or no on each candidate, you can pool all your available votes and distribute them as you please. For example, if ten directors were on the ballot, you'd normally cast one vote for each director for each share you owned. Under a cumulative voting system, you could consolidate all of your votes from all of your shares and distribute them as you please. For instance, you might allocate 70% of your votes to one candidate, 30% to another, and none to the rest.
Mutual fund proxies
Institutional investors vote, too. Some
mutual funds
and pension funds have taken activist positions on various issues, attempting to influence the policies of the companies in which they are shareholders. But other funds have not announced their positions or their votes. The
SEC recently passed new rules that require mutual funds to adopt proxy-voting policies in the best interests of their clients and to disclose their proxy votes.
