Source: https://www.corpgov.net/tag/fiduciary-duty/
Timestamp: 2019-04-19 22:30:47
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fiduciary duty Archives - Corporate Governance
Tag Archives | fiduciary duty
Real-Time Proxy Voting Disclosure Will Drive Competition
James McRitchie, January 24, 2019 ,
Real-time proxy voting disclosure by big funds could drive competition for investments from individual investors and smaller institutional investors with few resources for proxy analysis. Such disclosures would also go a long way in solving problems raised by Delaware Supreme Court Chief Justice Leo E. Strine, Lucian Bebchuk, and the Main Street Investors Coalition regarding potential conflicts of interest and/or under/over investment in ESG analysis and advocacy. The cost of real-time proxy voting disclosure would be minimal and may actually save funds money currently spent converting voting files to pdfs.
Real-time disclosure would help customers compare voting records and could drive competition among big funds to vote the predominant values of their customers. For ease of use, Compare CalSTRS’ sortable real-time disclosures with those of State Street Institutional Investment Trust. [Graphic above from Pensions & Investments article, No excuse for fiduciary ignorance, 2/19/2018] Continue Reading →
Jill Fisch: Index Funds Investors Can Switch
James McRitchie, January 14, 2019 ,
Jill Fisch, et al. addresses a central myth around index funds and investors in Passive Investors (June 29, 2018). Her research has implications applicable to recent analysis and recommendations by Delaware Supreme Court Chief Justice Leo E. Strine Jr., Professor Lucian Bebchuk and others. The following is the central highlight:
Our key insight is that although index funds are locked into their investments, their investors are not. Like all mutual fund shareholders, investors in index funds can exit at any time by selling their shares and receiving the net asset value of their ownership interest. This exit option causes mutual funds – active and passive – to compete for investors both on price and performance. While the conventional view focuses on the competition between passive funds tracking the same index, our analysis suggests that passive funds also compete against active funds. Passive fund sponsors therefore have an incentive to take measures to neutralize the comparative advantage enjoyed by active funds, that is, their ability to use their investment discretion to generate alpha. Because they cannot compete by exiting underperforming companies, passive investors must compete by using “voice” to prevent asset outflow.
In the case of Strine’s concerns with political contributions, use of “voice” would be voting in favor of measures requiring shareholder approval or at least transparency of political contributions. While Strine’s paper was based on actual behavior, Fisch points to potential, if funds operate logically. The potential for “voice” to ensure competitiveness with active investors also addresses, at least in part, some of Bebchuk’s concerns.
Fisch also points out in another paper (Shareholder Collaboration) that passive investors are increasingly engaged in information production of their own, not “just as ‘reticent’ supporters of initiatives undertaken by activist hedge funds.” Because of their size, huge passive index funds often cast deciding votes. Because of their market-wide focus, they often have information the firm insiders do not have. In many cases the potential rewards for index funds can be disproportionately high, compared to their investment in time, since they typically hold a significant portion of the outstanding stock at most large firms.
Fiduciary obligations are complicated. “Mutual funds’ fiduciary duties require them to vote in a manner that benefits their investors, not each company that they hold in their portfolio.” (Passive Investors) For example, holding both target and bidder might lead to a different vote than holding only one.
Most troubling was the following:
Delaware law provides shareholders with the right to vote their shares as they see fit and does not impose any obligation on shareholders to vote unselfishly or to further the economic interests of the corporation. [See, e.g., Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Ringling, 53 A.2d 441, 447 (Del. 1947) (“Generally speaking, a shareholder may exercise wide liberality of judgment in the matter of voting, and it is not objectionable that his motives may be for personal profit, or determined by whims or caprice, so long as he violates no duty owed his fellow shareholders.”).]
Given that funds operate within such a weak standard, it is important that individuals, the real Main Street investors in index funds, have ready access to voting records in an easily compared format. Keith L. Johnson, et al., point out the importance of fiduciaries conducting “congruity analyses of proxy votes” with public statements statements by delegated fund managers.
As an example of how such potential inconsistencies might present, BlackRock states in its Investment Stewardship 2018 Annual Report, “During our direct engagements with companies, we address the issues covered by any shareholder proposals that we believe to be material to the long-term value of that company. Where management demonstrates a willingness to address the material issues raised, and we believe progress is being made, we will generally support the company and vote against the shareholder proposal.” (Emphasis added.)
On the surface, this stated practice of voting against shareholder resolutions that have been determined to be in the best interests of the company suggests there is a preference for supporting management over the interests of clients in improving company performance as soon as practical. The resulting disconnect between value creation and proxy voting sends mixed signals to clients, the company and the marketplace. It could have the practical effect of giving companies more room to ignore or delay value enhancing actions.
Fisch argues that index fund investors can switch and some can. However, many employer sponsored 401(k) and other plans provide few choices. Main Street investors are often, as Strine notes, “forced capitalists.” If their 401(k) plan administrators take little or no initiative to investigate potential conflicts or breaches of fiduciary duty, how would they know? Like index funds themselves, the only tool “forced capitalists” might have is “voice.” However, like index funds, they need information before they can voice concerns.
Under the current system, proxy votes only need to be disclosed once a year and can be in a format that makes sorting and analysis difficult. More frequent, transparent and user friendly proxy voting records would make it easier for employees to argue for investment options better aligned with value creation. Such information would also make it more difficult for employers to ignore their fiduciary duties.
Real-time, or close to real-time, proxy voting disclosures using an internet window into each fund’s existing proxy voting platform would facilitate the ability of Main Street investors, the beneficial owners, to hold companies accountable through the complex chain of ownership. Several public pension and “socially responsibe” mutual funds have made such disclosures for many years. (See an incomplete list in our Shareowner Action Handbook.)
I will address more of the rationale and benefits of “real-time” disclosure in an upcoming post. Check back or subscribe to email notifications.
Apple Shareholders Rejected Real Proxy Access
James McRitchie, March 1, 2016 ,
Apple shareholders rejected real proxy access at their meeting on February 25, 2016. Maybe shareholders thought they already have it. Recent decisions by the SEC could lead shareholders to believe proxy access was “substantially implemented.”
Maybe they wanted to support Apple’s management while the company is under attack from the FBI.
ISS recommended a “For” vote. Shouldn’t that have guaranteed passage?
We probably won’t know for months which Apple shareholders rejected real proxy access… and maybe that’s the key point.
Sharfman Pans Proxy Access Proposals by Public Pensions
James McRitchie, August 19, 2015 ,
Bernard Sharfman notified me of his post, Public-pension funds play with newest toy in corporate governance, saying: “As you know I am not a big fan of proxy access.” I was looking forward to a thoughtful analysis of the issues but that is not what I found. The R Street blog, where his piece was posted, apparently doesn’t allow comments. Don’t “free markets” and “real solutions” benefit from the free exchange of ideas? Since Sharfman has contributed to the CorpGov.net blog with more serious scholarship, I feel a greater obligation to point out his fallacies. Perhaps, with some dialogue, we will come closer to agreement. I would welcome his comments, as well as those from other readers. Continue Reading →
Norges to Announce More Proxy Votes in Advance of AGMs
James McRitchie, January 12, 2015 ,
The Norges Bank Investment Management (Norges), the largest sovereign wealth fund in the world, will publish its voting intentions prior to annual general stockholder meetings (AGMs) when it believes such action can help illustrate an important principle. (Norwegian oil fund to disclose voting intentions to illustrate ‘principle’) Continue Reading →
Video Friday: UK Law Commission Clarifies Fiduciary Duty?
James McRitchie, November 21, 2014 ,
The UK Law Commission’s final 2014 report and guidance on fiduciary duty:
The Review identified widespread concern about how fiduciary duties were interpreted in the context of investment. In particular, some stakeholders felt:
it was not clear who in the investment chain was subject to fiduciary duties and what those duties were;
their fiduciary duties required them to maximise returns over a short-time scale, precluding consideration of long-term factors which might impact on company performance;
their obligations were entirely defined and limited to their contractual obligations or required no more than a duty of care.
Research Design: Advance Proxy Vote Disclosers
James McRitchie, September 18, 2014 ,
As I mentioned in yesterday’s post, Council of Institutional Investors Fall 2014 Conference: Meeting Availability, I’m encouraging a research project looking into the impact that funds announcing their proxy votes in advance have or can have. I’ve joined with Pensions&Investments in arguing funds have a fiduciary duty to make such advance proxy vote disclosures when that could influence the outcome. Now I want to see if that condition ever applies. Under what circumstances is advance disclosure likely to influence the outcome of corporate elections? Continue Reading →
Announcing Proxy Votes Improves Corporate Governance
James McRitchie, June 19, 2014 ,
Shareowners Upholding Industry
Yesterday, I posted a recent letter to the editor of Pensions & Investments praising their editorial, Winning Over Proxy Voters, which argues that institutional investors have a fiduciary duty to announce their proxy votes in advance of annual meetings, if doing so is likely to influence voters. If institutional investors heed their call, it will speed the development of open client director voting (CDV) and more intelligent proxy votes.
As corporate power grows and the power of government falls, mechanisms to govern corporations become more important. As government power falls, their power to regulate corporations falls as well. Further, as the influence of corporations over governments increases (e.g. lobbying) the will of governments to regulate corporations also falls. – CHR for Social Responsibility
Historically, most retail shareowners toss their proxies. During the first year under the “notice and access” method for Internet delivery of proxy materials, less than 6% made use of their proxy votes. Those that do vote own disproportionately more shares (about 25-30% of total retail shares). The voting rate hasn’t improved much, if at all. This contrasts with almost all institutional investors voting, since they have a fiduciary duty to do so. Unfortunately, it isn’t time/cost efficient to read through the entire proxy to vote a few retail shares intelligently. Continue Reading →
Letter to P&I Re Fiduciary Duty Editorial
James McRitchie, June 18, 2014 ,
Below is an email I sent to Pensions & Investments (P&I) editorial chief Barry Burr praising their editorial enhancing fiduciary duty and opining on how it may speed the arrival of the time when retail investors will vote their values with the simple push of a button or two on their cell phones. I will follow this tomorrow with some additional remarks regarding the advent of open client directed voting, assisted by this expanded fiduciary duty.
Thank you for your important editorial, Winning Over Proxy Voters, which argues that institutional investors have a fiduciary duty to announce their proxy votes in advance of annual meetings, if doing so is likely to influence voters.
Votes are assets. Announcing votes in advance of meetings puts the value of those assets to their full use; announcing votes after the meeting does not. Continue Reading →
Corporate Tax Strategies Threaten Wealth Creation: Fiduciaries Must Consider the Impact on Society
James McRitchie, June 9, 2014 ,
Adam Kanzer
Guest Post by Adam M. Kanzer, managing director and general counsel of Domini Social Investments LLC, New York. His responsibilities include directing Domini’s shareholder advocacy department, where for more than ten years he has led numerous dialogues with corporations on a wide range of social and environmental issues. The following originally appeared under the same title in the May 14, 2014 edition of Pensions & Investment. I added a few additional links.
Google Inc. shareholders May 14 rejected by a 93% vote a proposal sponsored by my firm, seeking the adoption of a responsible code of conduct to guide the company’s global tax strategies. I suspect this proposal prompted a quizzical reaction from many investors who assume that minimizing corporate tax payments is good for shareholders. An April 28 Pensions & Investments editorial, Tax exempt but tax conscious, wrestled with this issue, ultimately concluding fiduciaries could not ask companies to pay more. Continue Reading →
Fiduciary Duty to Announce Votes (Part 3): Take Action
James McRitchie, May 29, 2014 ,
This is the last in a three part series. See also Fiduciary Duty to Announce Votes (Part 1): Editorial Calls For Advanced Disclosure and Fiduciary Duty to Announce Votes (Part 2): Historical Background.
Take Action: Ask your mutual fund, pension fund, and/or endowment to:
Send you a copy of their proxy voting policies and their proxy voting record.
Report their votes in advance of annual shareholder meetings to ProxyDemocracy.org.
Make a small donation (not tax deductible) to ProxyDemocracy.org to keep that valuable service going or contact Andy Eggers to make a tax-deductible contribution through their 501(3) affiliate. I’ll match donations up to $2,000 until the end of June.
This is the first of a three part series. See also Fiduciary Duty to Announce Votes (Part 2): Historical Background and Fiduciary Duty to Announce Votes (Part 3): Take Action.
A recent editorial in Pensions & Investments (P&I), Winning over proxy voters, essentially argues that pensions have a fiduciary duty to announce their proxy votes in advance of the annual general meeting (AGM) if doing so is likely to influence the vote. This minor extension of current practice could have a profound impact and should also apply it to mutual funds and investment advisors, as well as other institutional investors, such as endowments.
The editorial discusses Warren Buffett’s recent reluctance to vote against the pay package at Coca-Cola.
Video Friday: Vote "For" Proxy Access at Reeds Inc. (REED)
James McRitchie, December 13, 2013 ,
My first effort to record a video on corporate governance is about my proxy access proposal, now being voted on at Reeds Inc. (REED). The video below explains Reeds’ great potential and why I submitted a 2013 shareholder proposal to allow shareholders proxy access for up to two director nominees.
Did you know 40% of our Board members own NO stock in our company or that directors are expected to show up for 10 Board meetings a year (plus various committee meetings) but are paid as little as $750 for their service? For that kind of work, with such little financial reward, what is their motive? Are they really Continue Reading →
GMI Enhances AGR Product
James McRitchie, October 29, 2013 ,
GMI has enhanced their Accounting & Governance Risk (AGR®) ratings product. As I have indicated elsewhere, products like this one and GMI’s Forensic Alpha Model (FAM™)do a great deal in advancing corporate governance. See my September 26, 2013 post and FAMulous Basis for Achieving Alpha. Continue Reading →
Agency Capitalism: Corrective Measures (Part 1)
James McRitchie, March 13, 2013 ,
In their recent paper, The Agency Costs of Agency Capitalism: Activist Investors and the Revaluation of Governance Rights, Ronald J. Gilson and Jeffrey N. Gordon (January 1, 2013) argue that proposed reforms to accelerate disclosure of equity positions and prohibit certain derivatives would discourage the vital role of activist shareowners. Below, I argue in support of their position and for additional measures to counterbalance the central problem of devalued governance rights. Continue Reading →
How Not to Argue for Bonuses. Reprinted with permission from PIRC Alerts, 17 July 2012. PIRC is the UK’s leading independent research and advisory consultancy providing services to institutional investors on corporate governance and corporate social responsibility. Continue Reading →
Research on Post-Modern Portfolio Theory Awarded by IRRC Institute
James McRitchie, February 21, 2012 ,
The Investor Responsibility Research Center (IRRC) Institute today announced the first recipients of a new annual research competition that examines the interaction of the real economy with investment theory. A blue-ribbon panel of judges selected two papers – one practitioner and one academic – for the new IRRC Institute Research Award. The authors of each research paper received a $10,000 award.
Steve Lydenberg received the practitioner award for research entitled, Reason, Rationality and Fiduciary Duty. A 30-year veteran of the asset management Continue Reading →
Video Friday: Monks & MoxyVote – Institutional Investors Need a Push
James McRitchie, December 30, 2011 ,
I can’t think of a better way to end the year’s videos than watching Robert Monks rehearse his opening speech for GMI’s Public Funds Forum 2011 and the great cartoon from MoxyVote.com. Bob always knows how to uncover the camouflage and lay out the misdeeds of the Business Roundtable and Chamber of Commerce, as well as how to push Continue Reading →
Who May Sue You and Why: How to Reduce Your ERISA Risks, and the Role of Fiduciary Liability Insurance
James McRitchie, August 13, 2010 ,
Chubb asked the ERISA-experienced law firm of Morgan Lewis & Bockius, LLP, along with Alison L . Martin of Chubb’s Specialty Claims Department, to write this free booklet to help customers and brokers understand the potential liability that fiduciaries face in today’s litigious environment. Some of the most significant litigation concerning retirement plans includes:
“Stock drop” (Enron-style) cases under defined contribution (ESOP and 401(k)) plans, alleging plan fiduciaries acted imprudently in offering an employer stock fund or misrepresented the risks associated with investments in a plan sponsor’s stock;
“Fees and expense” cases alleging that the plan fiduciaries breached their obligations to the plan and its participants by charging or permitting excessive fees and expenses for plan services provided by third parties, such as investment management, recordkeeping, and asset custody;
Investment imprudence cases alleging that plan fiduciaries breached their duties to invest plan assets prudently, breached their duty of loyalty, had conflicts of interest, and/or engaged in prohibited transactions;
“Anti-cutback” cases alleging that benefits (such as severance or pension adders) were promised and vested under the plan document and improperly cut back in anticipation of a change in control or during a time of corporate penury;
Claims that plan administrators have otherwise acted in contravention of plan or statutory provisions, such as violating plan rules limiting which expenses the plan can pay or the kinds of distributions the plan may make, or violating the statutory benefit accrual or vesting rules; and
“Cash balance” cases alleging that the cash balance pension plan itself violates ERISA prohibitions against age discrimination, or results in unfair annuity calculations or inappropriate benefit freezes upon conversion.
Class action welfare plan cases which can also take various forms, including:
Retiree medical cases alleging that the plan sponsor or the plan fiduciaries improperly changed or terminated post-retirement medical benefits; and
Medical premium cases alleging that premiums are excessive or that fiduciaries breached their duties by failing to apply sufficient scrutiny to the cost structure attendant to benefits.
Miscellaneous class action claims involving benefit plans, including:
ESOP claims alleging stock was improperly valued, plan fiduciaries engaged in prohibited transactions or other conflicts of interest, and/or corporate changes disadvantaged ESOP participants;
Misrepresentation or omission claims, such as that the employer failed to inform employees it was about to adopt severance or early retirement benefit improvements that were under “serious consideration” at the time of their separation or retirement;
“Alternative” worker claims alleging that some workers (such as independent contractors and leased employees) were inappropriately excluded from plan participation;
Long-term disability plan claims alleging that the plans were not administered in accordance with their terms (e .g ., terms offsetting Workers’ Compensation and other benefits received under other benefit programs); and
“Discrimination” or retaliation claims, under ERISA Section 510, alleging that groups of individuals were selected for adverse employment actions (such as layoffs or termination of employee status while on disability) in order to prevent them from becoming eligible for or receiving medical and/or other benefits.
Fiduciary Duty for Sustainability
James McRitchie, March 31, 2010 ,
The nation’s largest private water utility company has joined a federal lawsuit that aims to force the manufacturer of atrazine, a widely-used herbicide, to pay for its removal from drinking water. The class action lawsuit was filed in U.S. District Court for the Southern District of Illinois alleging that Syngenta, Inc. made billions of dollars selling atrazine while local taxpayers were left “the ever-growing bill for filtering the toxic product from the public’s drinking water.” (Nation’s Largest Private Water Utility Joins Lawsuit Against Herbicide Maker, Common Dreams, 3/31/10) Governance questions:
Will the fact that EPA registered atrazine provide adequate legal protection?
Did Syngenta’s board fully consider the risk of such lawsuits?
What about your company’s products and board?
In a related story, Harrington Investments, Inc. (HII) announced that Intel agreed to amend the Charter of their Corporate Governance and Nominating Committee to include “corporate responsibility and sustainability performance.” Intel also provided Harrington with an outside legal opinion stating that under Delaware Law, directors have a fiduciary duty to address corporate responsibility and sustainability performance as specified in the committee charter. Said John Harrington:
Intel has acknowledged in their committee charter, that directors must take into consideration corporate responsibility and sustainability performance, including long and short term trends and impacts on Intel’s business, as part of their fiduciary duty. This is a major victory for advocates of corporate responsibility and environmental sustainability, and others who strongly believe that these issues are essential in recognizing directors’ and officers’ fiduciary duty.
For the second year, Harrington Investments introduced a shareholder resolution to amend Intel’s bylaws to create a Board Committee on Sustainability. Intel initially opposed the resolution but then engaged in a dialogue with HII. This resulted in Intel agreeing to change their corporate charter to require the Governance and Nominating Committee to:
review(s) and report(s) to the Board on a periodic basis with regards to matters of corporate responsibility and sustainability performance, including potential long and short term trends and impacts to our business of environmental, social and governance issues, including the company’s public reporting on these topics.
Intel also had their outside legal counsel Gibson, Dunn & Crutcher LLP write a legal opinion specifically stating that pursuant to Delaware law, corporate responsibility and sustainability reporting based upon the committee’s charter, was part of the fiduciary duty of company directors. With this agreement in hand, HII agreed to withdraw its bylaw amendment resolution. Harrington concluded by saying,
I am very appreciative of the work put in by Irving Gomez, Intel Shareholder Relations and Cary Clafter, Intel Corporate Secretary, on this very progressive change in Intel’s Committee Charter. It will be of great assistant in moving forward with other corporations in our efforts to get corporate management to recognize that corporate social responsibility, including environmental sustainability and human rights, is an integral part of directors’ and officers’ fiduciary duty.
Harrington Investments, Inc. is a 28 year-old Napa, California-based socially responsible investment advisory firm that manages assets of individual and institutional investors requiring social and environmental as well as financial portfolio performance. Harrington utilizes a comprehensive social and environmental screen, commits clients’ assets to community investing and engages in shareholder advocacy, recently introducing shareholder resolutions specifically on U.S. economic security, corporate governance, CEO compensation and advancing human rights and sustainability as part of corporate officers’ fiduciary duties.
See also, Don’t Ask, Don’t Tell: A Poor Framework for Risk Analysis by Both Investors and Directors, HLS Corpgov and Financial Regulation blog, 11/15/09), Is Responsible Investing a Must, or a Should? UNEP FI on Fiduciary Responsibility, RMG blog, 7/24/09), and How companies manage sustainability: McKinsey Global Survey results, 3/2010.
James McRitchie, November 21, 2008 ,
Kent Greenfield’s The Failure of Corporate Law: Fundamental Flaws and Progressive Possibilities posits that corporation law shouldn’t be thought of as “private” law, which governs the relationships of individuals, but as a branch of “public” law, such as constitutional, tax, or environmental law. Corporations are sanctioned by the state and our goals for them should include more than just maximizing profits for shareowners.
Corporate laws determine the rules for some of the largest most powerful entities in the world and America is exporting our model abroad. I’ve warned audiences around the world not to adopt our regulatory scheme wholesale. While my advice has been vindicated by the latest financial meltdown, it is good to see an extraordinary legal scholar pushing for thoughtful change. Continue Reading →
Mutual Funds Should Disclose Votes
James McRitchie, January 8, 2001 ,
On December 19, 2000 the AFL-CIO petitioned the Securities and Exchange Commission to require mutual funds to disclose how they are voting their shares. Currently, mutual funds aren’t required to disclose the principles they use when voting in corporate elections. Nor do they have to tell investors how they voted. Unlike pension funds, there isn’t even a requirement that mutual funds vote in the best interest of shareholders.
Recently, the UK began requiring that pension funds disclose their social investment policies (if they have such policies). Just as that law brought a new level of scrutiny to the investment decisions of UK pension funds, the reforms advocated by the AFL-CIO would allow individual investors in the US to ensure their shares are being voted consistent with their values.
As early as 1988 the Department of Labor set forth the opinion that, since proxy voting can add value, voting rights are subject to the same fiduciary standards as other plan assets. In my opinion, it’s about time that mutual funds and other institutional investors also accepted the responsibilities of ownership.
Most mutual funds don’t disclose their proxy voting policies or their votes. Perhaps they are reluctant to provide such disclosure for fear of being deselected by corporate 401(k) plans over particular votes. In addition, in many fund families the votes of the funds are probably not in harmony. Some funds will initially find such disclosures difficult, since they risk losing corporate clients. However, if it is a legal requirement, there will be a level playing field where advantage can best be gained by working in the shareholder’s best interest. Disclosure of mutual fund proxy voting policies and voting behavior should enhance the return on capital by increasing the accountability of corporate officers to corporate owners.
To make the information easy for investors to use, the AFL-CIO asked the SEC to require mutual funds to disclose both holdings and voting information on the Internet in a user-friendly format. A copy of the petition is available by calling (202) 637-3900. For information contact: Bill Patterson (202) 637-3900 or Lane Windham (202) 637-5018. I encourage all readers to add their voices to the AFL-CIO’s request. If fulfilled, it would be one of the most important developments in corporate governance ever.
For more information, read Mercer Bullard’s article “Make 2001 the Year You Become an Activist Fund Shareholder” in TheStreet.com, or go directly to his Fund Democracy website for sample letters to the SEC and additional resources. In a follow-up article, “Are Ballots Too Secret? Fund Advisers Should Tell How They Vote Proxies,” Bullard says the AFL-CIO’s proposal “holds out the best hope for improving corporate democracy in 2001.”
In my opinion, if adopted, mutual fund vote disclosure would rank in importance with the DOL mandate that pension funds treat voting as a plan asset and the SEC’s 1992 reforms which allow shareholders to communicate with each other without going through elaborate and expensive filing procedures.