Broadridge's CEO on Proxy Votes, Activists, and Corporate Governance | At Barron's

Summary

In this interview, Andy Serwer of at Barons speaks with Tim Gouki, CEO of Broadridge, a $23 billion fintech company providing critical infrastructure for corporate governance, capital markets, and wealth management. Gouki discusses Broadridge's evolution from its ADP roots to an independent entity, its role in democratizing investing, and its impact on shareholder activism. The conversation also covers modernizing wealth management and the company's commitment to supporting elite athletes through internships, including eight who will represent the US in the Paris Olympics.

Takeaways

• 🌐 Broadridge is a global fintech company with a market cap of 23 billion, providing core infrastructure for corporate governance, capital markets, wealth, and asset management.
• 🛠️ The company focuses on creating industry solutions that are critical and often have a regulatory angle but are less differentiating, such as the infrastructure behind corporate governance and fixed income processing.
• 📈 Broadridge has grown significantly since becoming independent from ADP in 2007, expanding from 3,000 associates and a market cap of 2.5 billion to 15,000 associates and a 23 billion market cap today.
• 🏛️ Broadridge plays a significant role in the proxy voting process, managing the synchronization of shareholder data, voting events, and communication with investors, as well as the tabulation of votes and results dissemination.
• 🔄 The company has transitioned from solely back-office operations to also serving the front office in capital markets, providing a front-to-back service model.
• 💡 Broadridge's history includes being part of ADP and solving a significant corporate governance problem in the 1980s by streamlining the distribution of proxy materials to investors.
• 🗳️ The script discusses the evolution of proxy voting, with more than 80% of it now being done digitally, and the impact of universal proxy on shareholder activism and corporate governance.
• 📊 There is a growing trend of democratization in investing, with an increase in retail investors and a shift towards passive investment strategies alongside active portfolio management.
• 🤖 Modernizing wealth management is a key focus area for Broadridge, which involves leveraging technology to provide integrated solutions for wealth management firms and enhance client value.
• 🏆 Tim Gokey, CEO of Broadridge, shares his journey from considering a career in politics to investment banking, consulting, and ultimately leading Broadridge through significant transformation and growth.
• 🥇 Broadridge's sponsorship of the US Women's Rowing Team is not just financial but also includes providing internships, which has led to Broadridge associates representing the US in the Olympics.

Q & A

What is Broadridge's core business?

Broadridge is a global fintech company that provides core infrastructure behind corporate governance, capital markets, wealth, and asset management, focusing on creating industry solutions that are critical and often have a regulatory angle.

How has Broadridge evolved from its early days?

Broadridge was founded in the early 60s and became a core part of Wall Street's fabric. It was part of ADP and later separated in 2007 to become an independent company, growing from 3,000 associates and a market cap of 2.5 billion to 15,000 associates and a 23 billion market cap today.

What role does Broadridge play in the corporate governance process?

Broadridge provides infrastructure for corporate governance, including the synchronization of account holder information, public company events, and voting processes. They facilitate communication, vote collection, and provide a 24/7 technology platform for all participants.

How has Broadridge adapted to the shift towards digital in the financial industry?

Broadridge has entered the front office and serves capital markets from front to back, providing technology platforms that support both digital and traditional paper-based processes, with more than 80% of proxies being processed digitally.

What is the significance of Universal Proxy in shareholder contests?

Universal Proxy allows all director candidates to be listed on a single ballot, giving activists more leverage by allowing them to target specific board seats without needing to contest the entire board.

How does Broadridge facilitate the voting process for public companies and shareholders?

Broadridge synchronizes information from public companies and brokerage firms, communicates with investors about meetings and voting, collects votes, and provides real-time updates to all parties involved, including tabulating votes and reporting results.

What is the impact of passive investors on Broadridge's business?

Passive investors, through funds like S&P 500, hold a significant proportion of shareholdings in public companies. These shares need to be voted, and Broadridge is involved in facilitating this process, reflecting the growing influence of passive investment on corporate governance.

How is Broadridge involved in wealth management modernization?

Broadridge is focused on building a platform for the future of wealth management that integrates various technologies to help wealth management firms provide value-added services, such as financial planning, and compete with fully digital entrants.

What is Tim Gokey's background, and how did he become the CEO of Broadridge?

Tim Gokey studied engineering, computer science, and public affairs at Princeton University. He started in investment banking, moved to consulting at McKinsey, and eventually joined Broadridge, where he learned from the company's founder, Rich Daly, and took on the role of CEO in 2019.

What is Broadridge's approach to shareholder value and performance?

Broadridge aims to grow revenues organically by 5-7%, with acquisitions adding another 2%, and use its technology operating leverage to grow earnings. They also buy back shares and pay dividends to deliver low teens returns to shareholders with low volatility and high defensiveness.

Why does Broadridge sponsor the US Women's Rowing Team, and what benefits does it bring to the company?

Broadridge sponsors the US Women's Rowing Team by providing internships, allowing athletes to continue their careers while training. This association not only supports elite athletes but also brings highly disciplined, hardworking, and academically accomplished individuals to Broadridge, who can potentially become valuable employees post-career.