Protect the Voice of Shareholders

Protect the Voice of Shareholders is the name of a new website created by Institutional Shareholders Services (ISS) and the Council of Institutional Investors (CII). The educational website supports the current system, where institutional investors pay for and receive independent research and voting recommendations from proxy advisory firms for the public corporations in which they are owners.

The site was launched in conjunction with a new Morning Consult poll of nearly 2,000 registered voters that found voters do not want Senators to advance the mis-named Corporate Governance Reform and Transparency Act of 2017 (H.R. 4015). H.R. 4015 passed in December 2017 in the U.S. House of Representatives and that, among other changes, would permit public company management to potentially stall or block proxy adviser reports and recommendations to their investor clients.

Said Gary Retelny, ISS president and CEO,

H.R. 4015 would harm workers and retirement savers across the country who entrust institutional investors with making informed investment decisions with their hard-earned money. This poll makes clear that American voters want their pension, IRA, and 401(k) managers to continue to receive unbiased, independent research and recommendations from proxy voting advisers and do not support a new law that would change the current system.

The new website, Protect the Voice of Shareholders (www.ProtectShareholders.org), corrects the inaccurate rhetoric pushed by H.R. 4015 proponents and shines light on the powerful special interests that are pushing the legislation. ISS and CII encourage individuals to visit the website to understand why they have collaborated to provide clarity and transparency on these important issues.

Said Ken Bertsch, Executive Director of the Council of Institutional Investors,

While proponents of H.R. 4015 have created the illusion of problems in proxy advising that need fixing by Congress, what they really seek to do is minimize the voice of shareholders and investors on matters like CEO pay. H.R. 4015, would require proxy advisory firms to share their research reports and voting recommendations with the companies that are the subject of their reports and recommendations before they share them with their paying customers, institutional investors.

Giving companies the right to review proxy advisors’ work before it goes to actual clients is unprecedented interference in the commercial marketplace. In practice, it could have the effect of slowing down the issuance of these reports, giving institutional investors less time to do their own analysis. It could also have the effect of encouraging proxy advisory firms to skew their reports and recommendations in favor of companies and no longer allow institutional investors to receive the unbiased and independent information they find useful in assisting them in making informed proxy voting decisions.

Finally, H.R. 4015 would increase regulatory costs imposing higher barriers to entry for new firms to enter, or existing firms to remain in, the industry.

A Morning Consult poll of 1,975 registered voters, fielded August 27-29, finds H.R. 4015 to be an important bipartisan issue that Senators should take into account when considering legislation that would undermine institutional investors and their proxy voting advisers. The findings include:

Voters oppose H.R. 4015 and want their Senator to oppose it too

• When asked “Do you support or oppose your Senator backing this proposed law?” of those who expressed opposition (strong or somewhat) or support (strong or somewhat), which was 1,031 respondents, a vast majority – 61% – oppose their Senator backing this legislation.

Institutional Investors should get first look at proxy adviser reports

• Registered voters. 47% of registered voters say Institutional Investors should get a first look at the research and recommendations prepared by proxy advisers, while only 13% say the CEOs and management teams should get a first peek.
• Party Affiliation. There is strong support across the political spectrum for this position – 65% from Democrats, 61% from Republicans, and 55% from independents.

Weighing in on corporate voting matters: Registered voters believe that CEOs and the management teams of public corporations should not interfere with corporate voting matters.

• Across the board, respondents agreed that firms that invest in public corporations on behalf of shareholders should have the ability to receive independent research and vote recommendations, and that public corporation CEOs and management should not interfere in the preparation of that research.
• In fact, voter support is more than double (54% versus 20%) compared to the point of view that “if they have a difference of opinion, CEOs and management of public corporations should be able to add their own comments to research reports made by independent researchers on matters like setting their own pay or appointing new people to serve on the Board.”

Opposition to H.R. 4015 also comes down to cost.

• 45% of registered voters say they are less likely to support the proposed law on the basis it may increase the cost to everyday shareholders saving for their futures through a pension, IRA or 401(k) plan. By contrast, just 18% say they would be more likely to support the law.
• This sentiment is strongest among Baby Boomers (and 54 – 72), with 54% less likely to support the proposed law due to cost.

More poll details can be found here. Full list of organizations supporting Protect the Voice of Shareholders effort. Congratulations to CII and ISS. I hope Protect the Voice of Shareholders will more reach more Americans than the fake news of the so-called Main Street Investors Coalition, which is spending millions to ensure corporations are controlled by managers and entrenched boards.

Take Action

Your senator needs to hear from you, since up until now it’s been largely a one-sided debate driven by misinformation. By entering your contact information here, the Protect the Voice of Shareholders site will send a brief email to your senator encouraging him or her to oppose calls by special interests to pass this law, which will weaken investor and shareholder rights.