In an era when investors are scrutinizing every line of proxy and every dollar of dilution, public companies are increasingly turning to voting forecasts to navigate the choppy waters of proxy season. Built on data, governance insights, and disciplined scenario analysis, these probabilistic predictions are incredibly accurate, but they do not promise results; they are powerful decision support tools. They help boards, general counsel, and corporate secretaries chart a course that aligns management's strategic goals with those likely to be approved by shareholders.
Purpose: To provide a sensitivity analysis of shareholder votes regarding the potential outcomes of voting items such as shareholder proposals, approval of stock compensation plans, capital increases, among other proposals.
What is a voting forecast? A voting forecast is a structured analysis that combines a company's specific shareholder base, historical voting patterns, proxy advisory firm guidelines, influence and proposal details. Many proposals are considered by proxy advisory firms and shareholders on a case-by-case basis, so companies typically need to run several predictive scenarios.
Ultimately, voting predictions tell you whether a proposal is likely to pass a shareholder vote. Plus, powerful predictions let you know exactly what the voting results will be.
When is Vote Prediction used? Vote Prediction can be used for any voting item submitted to shareholders, but in Alliance Advisors' experience, the three most common voting items are stock compensation plans, shareholder-submitted proposals, and authorized capital increases.
Equity plan proposal
Stock plan proposals (whether calling for the issuance of new shares or an entirely new plan) are among the most important voting items that come before shareholders. Performing voting predictions is an important step in the planning process. Predictive analytics will tell us the impact of the ISS and how important their support for the proposal is… spoiler… the results of the ISS are rarely conclusive. Equally important, forecasts can hone in on the number of shares a particular shareholder base will support.
Benefits of equity plan proposal:
Voting predictions serve as an early warning system to identify potential opponents before the actual vote. This allows time to address potential shareholder policy concerns and amend the proposal and disclosures, reducing the risk that the proposal will be defeated in a shareholder vote.
These provide the basis for targeted engagement and proposal optimization by pinpointing specific institutional investors who are likely to vote against you. This provides data to adjust the terms of equity plans as disclosures to maximize shareholder support. In some cases, voting projections may indicate to management that they may be able to seek more shares than originally proposed.
Shareholder proposals
Proposals submitted by shareholders are often a nuisance to management, but they should not be taken lightly. Companies typically want to see what the baseline support will be to determine whether a proposal will pass or not and the likely outcome of the vote. This will help determine the appropriate proxy solicitation strategy.
Benefits from shareholder proposals:
It helps determine whether active opposition, neutrality, or acceptance is appropriate based on the level of expected shareholder support, and prevents underestimating support for a proposal that is likely to pass.
Voting predictions can also help you position your overall proxy strategy and proposals. Based on shareholder sentiment and voting support levels, we provide data to help you create a more persuasive 'vote no' case and identify specific concerns to address in your opposition statement. It can also help determine whether voluntary adoption of proposal elements might weaken support.
capital increase
The increase in capital voting items is intended to cover increases or private placements of authorized shares exceeding 20 percent of outstanding shares. Voting predictions in this area can mean the difference between life and death for capital-strapped companies, especially small and medium-sized enterprises.
Benefits of funding proposal:
When raising capital, the most important benefit is the certainty that the proposal will be approved by shareholders. By proactively measuring shareholder support, companies can reduce execution risk and enable more timely decision-making. Additionally, the data collected from the study will help identify acceptable dilution thresholds and help build conditions (warrants, conversion rates, discounts) that maximize the probability of approval.
For exchange-listed companies that require shareholder approval (e.g., dilution greater than 20 percent under NYSE/Nasdaq rules), we can help you determine whether a private placement or registered offering is a more viable option.
For capital-hungry companies, voting predictions can help avoid failed proposals that undermine market credibility. It also minimizes legal and advisory fees associated with long-term campaigns and proxy solicitation costs associated with unsuccessful votes that require re-invitation.
In summary, voting predictions are a valuable tool for evaluating the success of any type of voting item. They provide boards and management teams with actionable data on the likelihood of success and proxy solicitation strategies, while demonstrating due diligence to board members and supporting informed decision-making. Companies looking to ensure their participation in shareholder meetings should contact a proxy attorney with a proven track record of providing accurate voting predictions.
