How pass-through voting is rewriting the rules of corporate influence

Pass-through voting has moved from a niche governance concept to one of the most closely watched developments in the US proxy ecosystem. As asset managers, issuers, regulators and technology providers grapple with questions around voting power, accountability and investor participation, the conversation has moved beyond the mechanics of proxy voting itself.

At its core, pass-through voting seeks to give underlying investors a greater say in how shares held through pooled investment vehicles are voted. Supporters view it as a natural extension of shareholder democracy, while critics point to potential complications around transparency and operational complexity.

While proponents of pass-through voting see an opportunity to make proxy voting more representative, skeptics question whether participation levels, investor engagement and the range of available choices are enough to deliver meaningful change.

What is clear is that the discussion is no longer centered on whether investors should have more influence. Instead, it’s about how that influence should be exercised and what infrastructure is needed to support it.

Investor choice at the forefront

For large asset managers, the conversation begins with investor demand. David Reiner, principal and head of Investor Choice at Vanguard, argues that expectations around investor participation have been building for years. Under the asset manager’s ‘Investor Choice’ program, individual investors, financial advisors and plan sponsors can choose a proxy voting policy option that is best aligned with their preferences.

'I think the expectation that investors have of any service provider, whether it's a fund manager, a brokerage provider, or really any company they interact with – is to be heard,' he says.

That expectation appears to be reflected in investor research. According to Reiner, Vanguard found that 83 percent of investors who responded said they think fund managers should consider investor preferences when casting proxy votes. More than half, almost 60 percent, said they would be interested in participating in such a program.

Those findings help explain why pass-through initiatives have expanded rapidly across the investment industry. Yet the model that is emerging today differs from earlier visions of direct shareholder voting. Rather than requiring investors to vote every individual ballot item, many programs allow investors to select from a menu of voting policies that guide how their shares are voted.

Reiner believes this approach strikes a necessary balance between participation and practicality.

'This policy program meets what investors want: to be heard,' he says. At the same time, he argues that a policy-based model avoids overwhelming investors with thousands of voting decisions while still enabling meaningful participation.

The question of scale has become particularly important as asset managers seek to expand access across increasingly large investor populations.

Reiner notes that Vanguard currently has 22 million investors who are eligible to participate in Investor Choice. Reaching that audience requires a framework that encourages participation rather than creating barriers to entry.

Building for scale

That challenge has also shaped how technology providers have approached the issue.

Swatika Rajaram, president of bank and broker-dealer solutions at Broadridge, has witnessed the acceleration first-hand. 'Broadridge is powering pass-through voting for more than $8 tn in 900 funds, up from 400 funds last year and only 8 funds three years ago,' she says.

That growth trajectory shows how quickly the concept has moved from pilot programs to wider implementation. According to Rajaram, two primary forces are driving adoption.

'One is asset managers wanting to democratize proxy voting more broadly,' she explains. 'The second growth driver is investor demand.'

While institutional investors have often been the earliest adopters, the broader opportunity increasingly lies with retail participation. As more investors become aware that voting options exist, demand appears to be rising alongside technological capability.

'I think the fact that investors realize this technology is available was a huge factor in driving demand,' Rajaram says.

She argues that growing awareness has combined with improving user experience to create momentum. 'I also think this was inevitable,' she adds, noting that industry discussions around pass-through voting began years before large-scale implementation became possible.

Technology has played a central role in making that transition feasible. Operational hurdles that once appeared prohibitive are becoming more manageable as platforms evolve and automation improves. Rajaram believes AI could eventually move the market beyond pre-selected voting policies and toward greater customization. 'AI puts the power of choosing your own philosophy, for lack of a better phrase, directly into the hands of investors,' she says.

The issuer view

From the issuer perspective, greater investor participation does not necessarily translate into greater visibility.

Richard Gluckselig, SVP, associate general counsel and assistant secretary at Regeneron Pharmaceuticals, acknowledges the democratic appeal of pass-through voting but notes that issuers have historically relied on relationships with large institutional investors to understand shareholder sentiment and anticipate voting outcomes. Pass-through voting potentially changes that dynamic.

'Most shares are voted by large asset managers or institutions,' Gluckselig explains. 'At least you know who they are.'

Those established relationships have traditionally provided companies with a degree of certainty during proxy season. Stewardship teams, portfolio managers and governance professionals could engage directly with issuers, discuss concerns and communicate voting expectations. As voting authority becomes distributed among larger numbers of underlying investors, that visibility may diminish.

'With pass-through voting, it becomes a little more complicated,' Gluckselig says. 'You do not necessarily know who holds your company or how they will vote on some of the proposals on your ballot.'

The result, he argues, is 'a bit less predictability and less transparency from the company’s perspective when this concept is fully implemented.'

It means that the concept of meaningful transparency could depend on where a stakeholder sits within the governance ecosystem. For investors, transparency may mean having greater visibility into how votes are cast and greater control over those decisions. For issuers, transparency often relates to understanding who is influencing voting outcomes and how those decisions are made.

Gluckselig believes recent regulatory and market developments have already contributed to a more uncertain environment.

'There has already been less transparency in the US in voting outcomes and voting decisions in the last couple of years,' he says.

Combined with pass-through voting, he argues, those developments are 'helping create a sort of perfect storm for companies, with less predictability in the markets and in voting decisions.'

The implications of this extend beyond transparency and into shareholder engagement itself.

Historically, companies have concentrated engagement efforts on a small number of major shareholders. That model may become less effective if voting power becomes more widely dispersed.

Gluckselig points to the practical challenge of scaling investor outreach. 'If suddenly this is widely dispersed and you have not 20 but 2,000, you will have to rethink the way you solicit your votes,' he says.

Such a shift could fundamentally alter how issuers communicate with shareholders and how governance concerns are raised and addressed. The challenge is particularly relevant as participation expands among retail investors, a group that has previously been less active in proxy voting.

According to Reiner, successful participation depends heavily on thoughtful design. 'I think design is a critical feature here,' he says.

Vanguard's approach reflects lessons drawn from behavioral economics and investor engagement research. Rather than maximizing the number of available choices, the firm has focused on offering a limited set of options designed to capture a range of perspectives.

'If you look at our program, we offer five choices,' Reiner says. The reasoning is straightforward: 'We don't want to overwhelm people with every possible flavor of corporate governance because we know that can create choice overload and cause people to opt out.’

The concern around investor overload has featured prominently in discussions surrounding legislative proposals that proposed direct voting on every ballot item held within index funds. Critics argued that such an approach would place unrealistic demands on retail investors and ultimately suppress participation.

Supporters of policy-based voting frameworks say that carefully designed systems can avoid those pitfalls while preserving investor voice.

The importance of user experience is also evident in how technology providers are approaching implementation.

Rajaram says Broadridge has focused heavily on reducing friction and meeting investors where they already engage.

'In November, we integrated pass-through voting with our ProxyVote utility, where tens of millions of retail investors come to vote globally,' she says.

The objective is to simplify participation by embedding voting choices within familiar investor workflows rather than requiring separate processes.

Retail investors, however, need ‘more education and more outreach,' Rajaram explains. That reality suggests that expanding participation will depend as much on communication strategies as on technological infrastructure.

The next phase

The future trajectory of pass-through voting may also depend on whether the market converges around common standards. At present, stakeholders generally agree that the landscape remains fragmented.

'I think the time horizon matters,' Reiner says. 'In the near term, I think we'll continue to see a more fragmented approach. If we're going to see greater standardization, policymakers probably have an opportunity to help guide us toward it.’

Rajaram likewise sees standardization as a logical next step. 'We're actually working on a standardized industry solution,' she says, which she hopes will enhance efficiency, cost reduction and investor experience. A common framework would make participation easier for investors while reducing implementation costs for asset managers.

'We absolutely think this needs to become an industry solution, not a bespoke one-fund-at-a-time solution,' she adds.

Yet not everyone is convinced that convergence will occur quickly. Gluckselig points to broader political and regulatory divisions that continue to shape the governance environment.

'I would hope it becomes more standardized around certain models over time,' he says. 'But given how fractured we have become on many things, I am a bit skeptical that that is what is really going to happen.'

His observation aligns with the growing uncertainty surrounding US corporate governance. Political scrutiny of concentrated voting power, evolving regulatory priorities and changing expectations around stewardship continue to influence the direction of travel. Pass-through voting exists within that context.

For some observers, it represents a response to criticism aimed at large asset managers and their influence over corporate America. For others, it reflects genuine investor demand for greater participation. In reality, both explanations may hold some truth.

Gluckselig notes that large managers have faced criticism over the concentration of voting authority and suggests that pass-through initiatives can be viewed partly through that lens.

At the same time, technological improvements have made new approaches possible. A combination of political pressure, technological advancement and investor demand is likely to continue shaping the market.

What remains unresolved is how the governance ecosystem will adapt if participation continues to expand significantly.

For asset managers, the challenge is building systems that balance investor voice with usability. For issuers, it is understanding and engaging with a potentially more dispersed shareholder base. For technology providers, it is creating scalable infrastructure capable of supporting millions of voting decisions.

Despite differing perspectives, all three stakeholders point toward a similar conclusion: participation must be practical if it is to be meaningful.

As Reiner puts it: ‘We need to build programs that invite retail participation, not inhibit it.'