I. Introduction
During a company’s IPO journey, equity dispersion risks creating a concentration of power among dominant shareholders while marginalizing minority interests. Information asymmetries further heighten investment uncertainties, jeopardizing fair valuation and market confidence. Proxy voting emerges as a critical governance tool to address these challenges. By enabling inclusive participation in strategic decisions, it empowers all shareholders—regardless of stake size or location—to engage in corporate governance, mitigate agency risks, and safeguard collective interests.
II. Implementation of Proxy Voting Mechanisms in IPOs
1.Institutional Design
In the IPO process, the institutional design of the proxy voting mechanism is critical, as it directly determines whether the mechanism can function effectively and achieve its intended objectives. First, it is essential to clearly define shareholders' fundamental rights and obligations, including but not limited to rights to asset returns, participation in major decision-making, access to information, and oversight authority. Second, the mechanism must be structured in compliance with regulatory requirements to ensure alignment with IPO-related and corporate governance laws and regulations. Additionally, the design must balance the interests of minority and majority shareholders by implementing equitable voting rights allocation ratios and decision-making thresholds.
2.Operational Procedures
(1) Format Specifications of the Proxy Authorization
The proxy authorization serves as the core document for proxy voting, and its format must strictly adhere to standardized requirements. A valid proxy authorization should include the basic information of both the principal and the proxy holder to ensure the clarity and traceability of the delegated authority. Additionally, it must explicitly specify the delegated matters, such as the voting agenda items, specific voting instructions, and other pertinent details. The document should also clearly state the duration of the delegation, the scope of authorization granted, and bear the signature or seal of the principal alongside the execution date.
(2) Content Requirements
The content of the proxy authorization must be truthful, accurate, and comprehensive, with no false records, misleading statements, or material omissions. When soliciting proxy authorizations from shareholders, the company or proxy solicitation service provider is obligated to ensure that the documents provided comply with these requirements and bears responsibility for reviewing the proxy forms. Should any authorization be deemed invalid or contested, the company must promptly communicate with the relevant shareholders or proxy holders to resolve discrepancies, thereby mitigating risks to the validity of the voting outcome. For disputed or unclear proxy authorizations, the company must verify their authenticity through lawful means, including requesting supplementary materials from the principal if necessary.
(3) Voting Channels:
The diversification of voting channels in the IPO process provides shareholders with greater convenience. Below are detailed descriptions of traditional and modern electronic voting channels:
3.Communication and Feedback
During the IPO process, companies must ensure transparent communication by disseminating comprehensive, accurate, and timely information to shareholders through prospectuses, official channels, and investor relations teams, while addressing inquiries and organizing engagement activities. Proactive mobilization efforts—via emails, notifications, and collaborations with underwriters—should encourage voting participation and attract potential investors. Post-voting, firms must promptly disclose results, analyze shareholder preferences to guide strategic decisions, and address rejected proposals by investigating root causes (e.g., miscommunication, content objections) to implement corrective actions. This integrated approach enhances governance, aligns stakeholder interests, and improves decision-making efficiency.
III. Positive Impacts on Shareholder Relations
The proxy voting mechanism enhances shareholder relations during an IPO process through three key dimensions. Firstly, it strengthens shareholders' sense of participation and loyalty by simplifying the exercise of voting rights, which reinforces their awareness of rights and oversight capabilities. This reduces stock sell-offs, stabilizes share prices, and supports long-term corporate stability. Secondly, it fosters mutual alignment of interests by enabling companies to refine strategies based on shareholder feedback, thereby lowering financing costs and advancing sustainable growth. Thirdly, it builds institutional trust through transparent communication and responsiveness to voting outcomes, signaling respect for shareholder voices and cultivating enduring partnerships aligned with corporate objectives.
IV. Risks and Prevention Measures
While the proxy voting mechanism offers several positive effects during the IPO process, it also entails certain risks that require effective preventive measures.
V. Future Prospects
In the future, advancements in technology and market liberalization will present both opportunities and challenges for proxy voting mechanisms. Emerging technologies like blockchain and smart contracts could enhance security, efficiency, transparency, and tamper-resistance in voting processes. Simultaneously, globalization necessitates more sophisticated investor relations management, requiring companies to strengthen communication with international stakeholders and bolster global competitiveness. Continuous research and optimization of proxy voting systems will be critical to advancing IPO integrity and corporate governance standards.
Reference Linking:
Goverance-Guide-Proxy-Voting-July-2024.pdf
What is a proxy vote? A guide to voting by proxy – BoardEffect
What Is a Proxy Vote and How It Works, With Examples
Asset Management Fundamentals - Proxy Voting
How to vote: Voting by proxy - GOV.UK
Proxy vote: What it is, how it works, & the technology reshaping proxy season
Corporate Governance and Proxy Voting Guidelines for U.S. Securities