Bartlett Naylor, Financial Policy Reform Advocate, and Taylor Lincoln, Research Director, both with Public Citizen’s Congress Watch division, wrote an excellent post recently, Looking for Conflict in All the Wrong Places. They criticize the the Congressional hearing entitled “Examining the Market Power and Impact of Proxy Advisory Firms.”
Instead of proxy advisors, Congress should be looking at the JPMorgan proxy vote, where $5 million of the company’s money – shareholders’ money – was used to contest the resolution to split the CEO and chairman roles. And, of course, our money – the money of shareholders – is also being used right now to lobby Congress to weaken our rights.
Congress should be looking at mutual funds with business ties that are less likely to support shareholder proposals. Compare your mutual fund’s voting record with others on director elections, executive compensation, corporate governance and corporate impact at ProxyDemocracy.
Naylor and Lincoln go on to discuss problems with the vote count at JPMorgan and the denial of proxy access. The real conflicts they raise are spot on and much more legion. Try blank votes always going to management, phony VIF ballot titles because Broadridge claims laws that apply to proxies don’t apply to ballots sent out to retail shareowners and there is also biased vote reporting. See CII Sticks Up For Retail Investors on Blank Votes, Phony VIF Ballot Titles & Biased Vote Reporting.
Yes, Congress is looking in the wrong places. Even institutional investors like CII are sometimes coming up with the wrong answers. See Officials Tell House Panel Proxy Advisers Need to Be Registered. If, and I do mean if, ISS provides better proxy voting advice, it sure isn’t because they are registered investment advisers. I believe more competition would help. Shareowners should experiment with a new model, such as my recent proposal filed at Cisco. See also, Proxy Voting Brand Competition on the VoterMedia publications page.
The subscription model of ISS and Glass Lewis means they can only spend a very limited amount of time analyzing each proxy because they must review and report on thousands. A proxy advisor competition could open up the process to advisers spending much much more time, getting away from anything like a checkbox approach.
Instead of the advice going to the very few (proportionately) shareowners who subscribe to such services, it would be available to all shareowners. We might even get proxy advise from firms specializing in specific industries… much more knowledgeable about the issues and how they interrelate with corporate governance.
As a former regulator, who very much believes in the role of government, I believe regulations are not the answer for every problem. Let’s try more competition first and let’s look in the right places to find out why corporate election continue to be run like elections in North Korea.