Switching proxy voting service providers is a significant decision that can have far-reaching consequences, including disrupting shareholder meetings and creating compliance gaps. To make an informed decision, it is essential to evaluate potential providers carefully. Five key questions can help provide a practical framework for assessment.
First, it is necessary to determine if the provider processes ballots in real-time. This is where many legacy providers fall short, relying on outdated methods like fax or email chains, which can turn a two-day process into a two-week one. A provider that cannot confirm receipt of a ballot immediately gives no time to intervene if something goes wrong.
Evaluating Real-Time Processing
Real-time processing is important because late instructions are often rejected. It is advisable to ask for live demonstrations to see if the system can show a ballot moving from instruction to confirmation in minutes. It is also essential to check if real-time coverage runs across the entire custody chain or only certain parts of it. Some platforms deliver speed at the top of the chain but fall back on manual hand-offs further down, which can lead to lost votes and a fractured audit trail.
A platform that cannot provide real-time processing across the entire custody chain may not be genuinely real-time. This can lead to delays and errors, ultimately affecting the accuracy of the voting process. It is vital to evaluate the provider’s ability to handle ballots, votes, and disclosure requests as they occur, not in scheduled batches.
Another aspect to consider is the provider’s market coverage. A long list of supported markets on a sales sheet means little if it does not match where assets actually sit. It is essential to map the current portfolio against the provider’s confirmed market list and ask for specific details, rather than accepting general statements about supporting “most major markets”.
Assessing Market Coverage
Global coverage shapes how consistently the system behaves, and inconsistency can introduce errors into data and reporting. A platform that runs meetings through different workflows for different markets can lead to aggregated reporting issues. It is also key to ask how the provider keeps market coverage up to date, as regulation changes and market rules evolve over time.
A provider that has not revisited its market coverage in years may already be behind, and this can have significant implications for business. It is vital to evaluate the provider’s ability to adapt to changing market conditions and ensure that their platform remains compliant with regulatory requirements.
The quality of the audit trail is also a critical factor to consider. Transparency is non-negotiable, particularly in a regulatory environment that demands it. The Shareholder Rights Directive II requires institutions to confirm that votes have been cast correctly, and this confirmation must be grounded in an auditable record. The provider should be asked to walk through what a complete audit trail looks like on their platform, including who submitted an instruction, when it was received, and what confirmation went back to the beneficial owner.
Every step of the audit trail should be time-stamped and retrievable without filing a support request. The quality of the audit trail reveals a lot about the underlying architecture, and patchy records usually indicate patchy processing. If the trail has gaps, it is a sign of manual intervention somewhere in the workflow, and manual intervention is where errors build up.
It is advisable to ask to see audit records for a meeting that faced a late agenda change, a contested resolution, or a surge of last-minute instructions. This scenario tests the system’s ability to hold together under pressure, and a provider that cannot deliver a complete audit trail in such situations may not be reliable. The ability to provide a clear and transparent audit trail is essential for ensuring the integrity of the voting process and maintaining regulatory compliance.
The provider’s approach to authentication and operational risk is also critical. Proxy voting sits at the intersection of financial assets and corporate governance, so security and authentication standards matter. It is necessary to ask how the provider authenticates participants at each point in the chain and whether they validate instructions against a live register of authorised parties or accept them based on email confirmation alone.
Operational resilience is critical when evaluating a proxy voting service provider. The provider should have availability guarantees and disaster recovery protocols in place. This ensures the platform remains operational during peak meeting volumes. A provider that struggled during the last major AGM season will likely struggle again.
The migration process is also essential to consider. A poorly managed migration can disrupt live meetings and introduce data inconsistencies. The provider should have a detailed migration plan, including a timeline and named contacts. Data portability is also key, as it allows for the extraction of historical voting records in a format the new provider can ingest.
Migrating to a New Provider
A provider confident in their migration process will provide references from other institutions that have migrated to the platform. This demonstrates their ability to handle complex migrations. The migration plan should include a clear definition of what “live” means and when the old system is fully replaced by the new one.
The provider should also be able to explain how they handle records from meetings that are mid-cycle when the migration begins. This ensures a smooth transition and prevents data loss. By asking the right questions, institutions can ensure a successful migration to a new proxy voting service provider.
