How will the Global Proxy Exchange work?

The Global Proxy Exchange will be an electronic exchange that will allow investors to secure the proxy rights associated with their (direct and indirect) stock holdings and transfer those rights to anyone else on the exchange.

Every equity investor will have an account on the exchange. If a man indirectly owns shares through a mutual fund and pension plan, and directly holds shares through a brokerage account, those institutions will deposit all proxy rights associated with those holdings into his account on an ongoing basis. The man can access his account through the exchange's secure website. Through the website, he can use an advanced set of screens to view proxy materials, research issues and actually instruct the exchange on how to vote his shares. A more basic set of screens allow him to simply transfer all his rights to a third party.

Suppose the man decides to transfer all his rights to his trade union. Using the basic screens, he searches for his trade union and confirms that it has an account on the exchange and is willing to accept rights. With a single mouse click, he transfers all his rights to the union. His selection is not permanent; he can change it at any time. Until then, the union will continue to receive all rights deposited into his account.

What will the union do with the rights? Actually, it is in the same position as the man. It has an account with the exchange, and voting rights are being deposited into it—from the man’s account and perhaps from a thousand other accounts. If the union 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. For example, smaller trade unions might band together and form a dedicated non-profit organization to vote shares on their behalf. Each union would transfer its rights to that non-profit. But the union has other options. Through the exchange’s intermediate-level screens, it might choose to vote shares of companies whose activities directly affect its members but transfer the rest of its rights to a third party.

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.