Analysis of Proxy Advisors’ Recommendations During the 2020 Proxy Season

Harvard Law School Forum

A new analysis of companies’ supplemental filings to their proxy materials with the U.S. Securities and Exchange Commission (SEC) during the majority of the 2020 proxy season shows at least 42 instances where proxy advisors have formulated recommendations based on errors* or analysis disputed by the companies themselves.

For example, in one supplemental filing, a proxy advisor generated a recommendation using a disputed figure for a company’s net income, a basic but critical number. Another highlighted how a proxy advisor based its recommendation on a peer group that did not include the company’s actual competitors. Other filings showed instances where proxy advisors issued recommendations that appear to be contradictory with their stated policies.

These results are consistent with the prior analysis of supplemental filings we conducted into the 2016, 2017, and part of the 2018 proxy seasons, and which uncovered a total of 139 apparent errors.

The findings are significant as they show that disputes between companies and proxy firms have continued despite significant scrutiny from Congress, the SEC, and an array of impacted stakeholders. They suggest that these efforts have not fully had the intended effect and that further intervention is needed in order to ensure that investors have as accurate information as possible before voting their securities.

*In this post, any use of the term “errors” refer to cases where companies’ supplemental filings plainly stated that a proxy firm’s analysis contained either an outright factual mistake or fundamental errors or omissions in analysis when developing vote recommendations. Companies who submitted such filings are subject to antifraud provisions within SEC regulations and are legally liable for any misstatement of fact. A full accounting of the supplemental filings analyzed for the report is contained in the appendix of the complete publication.