Proxy voting

Voting the shares held for a client at company meetings. Under the Standards it is part of the duty of loyalty, and not voting needs a reasoned case that the cost to the client outweighs the benefit.

Where you will meet it

Proxy voting appears in 6 learning outcomes on the CFA syllabus. A few of them:

• Put the Loyalty, Prudence, and Care standard, III(A), into practice
  CFA Level I · Ethical and Professional Standards

  “Proxy voting is part of the duty, and a policy of not voting requires a cost-benefit justification rather than mere convenience.”

• Set out ways to build ESG considerations into planning and constructing a portfolio
  CFA Level I · Portfolio Management

  “Active ownership, through engagement and proxy voting, tries to change company behaviour rather than avoid it.”

• Show a deep grasp of CFA Institute's Code and Standards by using them to resolve particular cases
  CFA Level II · Ethical and Professional Standards

  “Loyalty extends to client brokerage, which belongs to the client, so extra commission may buy only research that benefits the client, and to informed proxy voting, where a cost-benefit view can justify not voting.”

• Identify where the returns and the risks of an index-tracking equity portfolio come from
  CFA Level III · Portfolio Management Pathway

  “The manager can add a little through securities lending fees, and index investors also carry stewardship duties through proxy voting and engagement.”

See also

Duty of loyalty

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
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