To understand how a proxy exchange will work, let’s return to the example of a woman who just received the letter from her mutual fund company.

Intrigued, she decides to assign her voting rights to a charity she supports that is involved in children’s issues. At her computer, she locates the website of the proxy exchange. After entering identifying information, she is taken to her own account page. The account has already been established for her by her mutual fund and brokerage firms. Those firms hold shares on her behalf, but they have placed the proxy rights in her account. She can do with them as she pleases. If she is so inclined, she can access relevant shareholder materials online and actually vote her shares through the exchange. The exchange has an advanced set of screens that will allow her to do precisely that. More basic screens allow the woman to simply transfer all her rights to a third party.

Using those basic screens, the woman searches for her charity and confirms that it is willing to accept voting rights. With a single mouse click, she transfers all her rights to the charity. Her selection is not permanent; she can change it at any time. Until then, the charity will continue to receive all rights deposited into her account.

What will the charity do with the rights? Actually, it is in the same position as the woman. It has an account with the exchange, and voting rights are being deposited into it—from the woman’s account and perhaps from a thousand other accounts. If the charity receives a large volume of rights, it may devote resources to voting them. If not, it can transfer them on to a trusted third party. Through the exchange’s intermediate-level screens, the charity has even more options. For example, it might choose to vote shares of companies whose activities affect children but transfer the rest of its rights to another charity.

Rights may pass through many hands before they end up in the account of a party with sufficient rights to justify the effort to constructively vote them. The entire process will be one of aggregation. Through the exchange, small blocks of rights will be aggregated into medium blocks, which will be aggregated into large blocks. Large blocks will be voted through the exchange.

Four distinct roles will be played by participants on the exchange:

1. assigners: institutions such as mutual funds, brokerages, and pension plans that legally assign proxy rights to the exchange;

2. beneficiaries: the beneficial stock owners—primarily individual investors—on whose behalf those rights are assigned to the exchange;

3. aggregators: anyone willing to accept rights from beneficiaries or other aggregators through the exchange; and

4.  voters: parties who ultimately make voting decisions.

Some participants will perform multiple roles. For example, suppose a woman and her father are both investors in a mutual fund. The fund assigns its proxy rights to the proxy exchange, identifying the woman and her father (along with other investors) as the beneficial owners. The father transfers his rights to the woman. She then transfers their combined rights to a charity, which votes the shares. In this case, the mutual fund is an assigner; the father is a beneficiary; the woman is both a beneficiary and an aggregator; and the charity is an aggregator and a voter.

Transferring, aggregating, and/or voting rights can be done by anyone who chooses to—charities, trade unions, professional associations, investment advisers, faith-based organizations, advocacy groups, retirees who do so as a hobby—anyone. An online community will develop. Tips and ideas will be exchanged. Upcoming votes will be discussed. Referrals will be made, as in, “You want to unload your Microsoft? Give ‘em to Joe. He knows the company inside and out, and he thinks the way you do. Check out his record.”

The Investor Suffrage Movement