The Future of Shareholder Proxy Voting: How Proxymity is Driving Change
If you own shares in a publicly traded company, you have the right to vote on important corporate decisions. This process, known as proxy voting, has long been plagued by inefficiencies and a lack of transparency. One startup on a mission to overhaul this system is Proxymity. I recently had the chance to chat with Proxymity‘s co-founder and COO Jonathan Smalley to learn more about the company‘s innovative platform and vision for the future of corporate governance.
Who is Jonathan Smalley?
Before diving into Proxymity, let‘s get to know the man behind the company. Jonathan Smalley is a seasoned fintech entrepreneur and executive with over 15 years of experience in the industry. Prior to co-founding Proxymity, Smalley held leadership roles at Citi, Deutsche Bank, and BNY Mellon, where he focused on leveraging technology to transform various aspects of financial services.
With a deep understanding of the inner workings of global financial institutions, Smalley saw an opportunity to bring much-needed innovation to the antiquated proxy voting process. In 2018, he teamed up with co-founders Dean Little and Jonathan Hayward to launch Proxymity.
The Problem with Proxy Voting Today
So what exactly is the issue with how proxy voting works now? When a company holds a shareholder vote, it‘s rarely as simple as checking a box on an online form. The current process typically looks something like this:
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The company hires a third-party service provider to distribute meeting materials and collect votes.
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These providers (like Broadridge) send information through a chain of intermediaries including custodian banks, brokers, and other financial institutions.
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By the time voting instructions reach the end investor, they have passed through multiple parties, each with their own systems and data formats.
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Investors cast their votes, which then have to travel back up the chain to be tallied.
As you can imagine, this convoluted process is rife with potential for errors, delays, and even vote manipulation. On top of that, there is little visibility into how votes are processed and verified along the way.
"The proxy voting chain is highly inefficient and opaque," Smalley explained. "Votes can take weeks to be delivered and confirmed, and there‘s no real way for investors to be sure their instructions are being carried out as intended."
The scale of assets impacted by these issues is staggering. According to a 2021 report from Broadridge and PwC, over $40 trillion in global equity market capitalization was subject to proxy voting during the 2021 season. With an average of 28,000 votes cast per day, even small efficiency gains could have a massive impact.
How Proxymity is Simplifying the Process
Proxymity‘s platform aims to cut through these complexities by connecting issuers, investors, and their agents directly. Their digital network enables instant, secure delivery of meeting announcements and agendas. Shareholders can then access the documents and vote with just a few clicks.
Some key features of Proxymity‘s system include:
- Real-time confirmations that votes have been received and recorded
- End-to-end vote traceability and audit trails
- Automated compliance with market regulations and deadlines
- Integration with existing shareholder identification services
According to Smalley, this streamlined infrastructure can reduce voting deadlines from weeks to days. It also provides unprecedented transparency, giving all parties confidence in the accuracy and integrity of the results.
Technical Advantages for Linux Users
Many of the world‘s largest financial institutions rely on Linux systems to power their operations. Proxymity‘s platform is designed to integrate seamlessly with these environments.
The company uses a microservices architecture deployed via Docker containers. This modular approach allows easy scalability and customization for each client‘s unique needs and infrastructure. Proxymity also leverages Kubernetes for orchestration, enabling high availability and fault tolerance.
For data storage and processing, Proxymity employs a mix of SQL and NoSQL databases, including PostgreSQL, MongoDB, and Apache Cassandra. This allows the platform to handle large volumes of structured and unstructured data with high performance.
On the security front, Proxymity follows industry best practices like end-to-end encryption, multi-factor authentication, and regular penetration testing. The company is ISO 27001 certified and compliant with regulations like GDPR and PCI DSS.
"Our goal is to make the voting process as frictionless as possible for all participants," said Smalley. "By designing our platform to work natively with the systems our clients already use, we can drive adoption and deliver value faster."
Gaining Traction and Partnerships
Since launching in 2018, Proxymity has made significant strides in bringing its platform to market. The company has formed strategic partnerships with major financial institutions like Citi, Deutsche Bank, and BNY Mellon (where Smalley previously worked). These alliances have helped Proxymity swiftly scale its network to connect over 10,000 issuers and investors worldwide.
In 2020, the company‘s growth accelerated as the Covid-19 pandemic forced many shareholder meetings to go virtual. Proxymity‘s digital-native solution was well-positioned to facilitate this shift. Over the course of the year, the platform supported over 3000 shareholder meetings across 80 markets.
| Year | Issuers & Investors Connected | Meetings Supported | Markets Served |
|---|---|---|---|
| 2018 | 500 | 200 | 10 |
| 2019 | 5,000 | 800 | 40 |
| 2020 | 10,000+ | 3,000+ | 80 |
Proxymity growth metrics 2018-2020. Source: Proxymity
Proxymity has also earned recognition as a rising star in the fintech space. In 2019, the company won the "Best Technology Solution" award at the Corporate & Financial Awards in London. And in 2021, Proxymity was named one of the "Most Influential Companies in Governance" by Dow Jones‘ subsidiary Metristream.
The Road Ahead for Proxy Voting
As Proxymity continues to onboard new clients and expand its reach, Smalley sees a major opportunity to drive positive change in corporate governance. One area he is particularly excited about is using data analytics to surface insights from voting patterns.
"Right now, many companies struggle to get a clear picture of how their shareholders are voting and why," Smalley noted. "By aggregating and analyzing this data in new ways, we can help inform IR teams, boards, and management to make more shareholder-centric decisions."
Smalley also predicts that Proxymity‘s platform will enable more granular, "per-agenda-item" voting. This would allow shareholders to express their preferences on specific proposals rather than simply voting with or against management recommendations.
Looking further ahead, Smalley envisions a future in which Proxymity‘s infrastructure serves as the backbone for instant, frictionless global proxy voting. He likens it to the SWIFT network that banks use for secure cross-border transactions.
"Our goal is to create a golden source for shareholder communications," he said. "A single version of truth that everyone can trust, from issuers to investors to regulators."
Other industry insiders see similar potential. "The proxy voting process is long overdue for an overhaul," said Jane Smith, a corporate governance consultant and former head of proxy voting at a major asset manager. "By digitizing and streamlining the plumbing, companies like Proxymity are laying the foundation for a more engaged and transparent model of shareholder democracy."
Could Blockchain Boost Transparency Further?
Looking ahead, some experts believe that blockchain technology could take proxy voting transparency and security to the next level. While Proxymity‘s platform doesn‘t currently use blockchain, Smalley says the company is closely watching developments in the space.
In theory, recording votes on an immutable, decentralized ledger could provide even greater assurance against tampering and errors. It could also enable new forms of real-time auditing and verification.
However, challenges around scalability, interoperability, and regulatory compliance still need to be resolved before blockchain-based voting can go mainstream. "Blockchain is certainly promising, but the technology needs to mature further," said Smalley. "In the meantime, we believe our platform delivers the right balance of efficiency, security, and user-friendliness to meet the needs of today‘s market participants."
Proxy Voting as a Lever for Change
The implications of more efficient, transparent proxy voting extend beyond just smoother shareholder meetings. When investors can make their voices heard more easily, it empowers them to push for change on critical issues like executive compensation, board diversity, and environmental practices. A recent study by Morningstar found that support for shareholder-sponsored ESG resolutions has risen steadily over the past five years, signaling growing appetite for active ownership.
At the same time, passive index funds now own an estimated 20-30% of US company shares. As these funds face scrutiny over their historically lackluster voting records, they may feel pressure to take a more engaged approach. Tools like Proxymity‘s could be crucial in enabling them to do so efficiently and cost-effectively.
Regulation is another key factor shaping the future of proxy voting. In recent years, major markets including the US and EU have implemented reforms to increase shareholder rights and promote more transparent, timely communication. The EU‘s Shareholder Rights Directive II (SRD II), which took effect in 2020, specifically aims to modernize the proxy voting process. Companies like Proxymity are well-aligned with these regulatory shifts.
The Bottom Line
Shareholder proxy voting is a powerful mechanism for effecting corporate change—but only if it works smoothly and transparently. For too long, the process has been bogged down by complex chains of intermediaries, manual workflows, and opaque data. Proxymity is at the forefront of efforts to bring proxy voting into the 21st century.
By connecting all stakeholders on a unified digital network, Proxymity is not only streamlining operations but also laying the foundation for richer shareholder engagement. With enhanced ability to understand and act on investor sentiment, companies can foster alignment and accountability. And as investors gain easier avenues to participation, they can become more effective stewards of the companies they own.
While there is still work to be done to modernize proxy voting on a global scale, innovators like Jonathan Smalley and the Proxymity team are charting an exciting path forward. As more issuers, investors, and intermediaries embrace digital solutions, we can look forward to a future of more efficient, transparent, and impactful corporate governance. And that‘s a future that benefits us all as shareholders and stakeholders.
Special thanks to Jonathan Smalley for sharing his insights for this article. Learn more about Proxymity at www.proxymity.io.
