Think Twice Before Agreeing With Management

Did you know that companies in which you own stock may be doing things you don't like, and you may be giving them your blessing? We're now in the midst of annual-report season, when our postal carriers deliver us hefty booklets filled with tables, numbers, and proxy-voting materials, in which a company invites you to vote on various matters.

If you've always assumed that there's little point in doing so, because you're such an insignificant owner, you're not being entirely unreasonable. Imagine, for example, that you own 500 shares of Oracle (Nasdaq: ORCL  ) . That's worth more than $7,000 and is likely a significant asset to you. But Oracle has more than 5billion shares outstanding. So your ownership share is less than one 10-millionth of the company. Yes, you are an honest-to-goodness co-owner of the firm, but you're not a major player, just as most of us are not, with the companies we own.

Still, it may be worth voting with those proxy forms. Why? Because of a little-known detail: If you don't send it in, it doesn't mean you're abstaining -- it means you're agreeing with management! That's right -- imagine a presidential election in which everyone who doesn't vote is automatically credited with a vote for the incumbent.

These days, it's not uncommon to see a host of shareholder proposals being voted on. If you want your opinion to be counted along with those of other small investors (all of whom do add up, if they all vote), send in the form or vote online. (Doing the latter saves the firm some moola.) If you really do want to abstain, you must send in the form and mark the "abstain" boxes.

Shareholders have addressed many of their companies' topics successfully. Shareholder pressure led to JPMorgan Chase (NYSE: JPM  ) creating its Office of Environmental Affairs and to Whole Foods (Nasdaq: WFMI  ) supermarkets labeling genetically modified foods. Shareholders are currently proposing that Apple (Nasdaq: AAPL  ) should look into how it can improve its recycling programs.

One issue on the table at many companies is majority voting in elections of board members, instead of the common plurality system. Here's how the folks at Institutional Shareholder Services explained it: "Under the current plurality system, a board-backed nominee in an uncontested election needs to receive only a single affirmative vote to claim his or her seat in the boardroom. ... Under the majority vote standard being proposed by a number of shareholders, a director nominee would have to receive support from holders of a majority of the votes cast in order to be elected (or re-elected) to the board."

My proxy materials from Home Depot (NYSE: HD  ) revealed a proposal to switch to majority voting, and shareholders of Sprint Nextel (NYSE: S  ) have already approved such a proposal. You'll most often find in your proxy materials that management advises you to vote against pretty much every shareholder proposal, but Marriott International (NYSE: MAR  ) is one company that bucked that trend, supporting a proposal for majority voting.

Here's some more advice, from the Social Investment Forum's Advocacy and Policy Program, which serves as a clearinghouse of information on shareholder advocacy and socially responsible investing:

• If you don't understand the issue(s) at hand, seek guidance. The Shareholder Action Network offers some resources, and online discussion boards (such as those at http://boards.fool.com) can help you gather information and opinions, too.
  
  
• If you're invested in a mutual fund or some other kind of investment that doesn't permit you to vote directly, you can find out how the fund's proxies will be voted. Fund companies often offer voting guidelines to help you understand what the fund's positions are on various issues. If you're not offered such information, make a little noise and ask for it.

Learn more at sriadvocacy.org and at proxyinformation.com.

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JPMorgan Chase is a Motley Fool Income Investor recommendation. Home Depot is a Motley Fool Inside Value pick, and Whole Foods is a Motley Fool Stock Advisor selection. Try out any of our newsletter services free for 30 days .

Longtime Fool contributor Selena Maranjian owns shares of Home Depot. The Motley Fool has a disclosure policy.