Corporate governance has become increasingly politicized in recent years, with very real consequences for investors and financial institutions of all kinds. From a looming funding crisis facing the nation’s public pension system to the emergence of quasi-regulators operating with unchecked powers and limited scrutiny, there has been increased focus on politically motivated investments, often at the expense of traditional fiduciary responsibility aimed at maximizing returns.
While most of the details have now been confirmed, there remains debate over a company’s ability to review and respond to proxy advisors’ reports, as well as the practice of “robo-voting”, where certain investors are automatically following proxy firms’ guidance without doing their own due diligence.
Last year, a report commissioned by the American Council for Capital Formation, a non-profit, found 139 purported “proxy adviser errors” across 94 different companies. But in a letter to the SEC last month, the CII said that when it delved into the ACCF report, it found that “most of the claimed errors were actually disagreements on analysis and methodologies.”
Wall Street Journal
Studies have found that the two firms can swing 20% of votes in proxy elections. An American Council for Capital Formation review last year found that 175 asset managers with $5 trillion of assets voted with ISS recommendations 95% of the time. Activist hedge-fund investors often enlist the proxy firms to shake up management, for better or worse.
Research & Publications
ACCF Report Finds Numerous Asset Managers Voting in Lockstep with Proxy Advisor Recommendations
ACCF-commissioned research confirms alarming practice of robo-voting is real and quantifies scale of proxy advisor errors
EXECUTIVE SUMMARY As the trend of Environmental, Social, and Governance (“ESG”)1 investing has risen, so too has the influence and relative importance of ESG rating...