Real Main Street Investors are NOT the members of a Coalition formed by the National Association of Manufacturers to buttress arguments made by the Business Roundtable and United States Chamber of Commerce. (see Main Street Investors: Battle Coming) In fact, real Main Street investors are an endangered species that may actually go away if the Coalition gets its way.
The Coalition appears to be getting traction with SEC Chairman Clayton who mentioned “Main Street Investors” 28 times in testimony to the House Committee on Financial Services. Or, perhaps he is referencing the real main street investors, not the Coalition?
The Coalition has budgeted millions of dollars on an information campaign based on paid for biased research. For example, one of their surveys found that 78% of ETF investors chose passive funds for stable, consistent returns, while only 11% select ETFs for how they influence worthy political or social causes.
However, most of the 78% investing primarily for money also may want both: earn money and have a positive influence. The survey was designed to exclude measuring the popularity of such motivations.
Real Main Street Investors Endangered
Who are the real Main Street Investors? According to Wikipedia, “Main Street” represents the interests of everyday people and small business owners, in contrast with “Wall Street.” Further, investors are those who “allocate capital with the expectation of a future financial return.”
By that definition, real Main Street investors are an endangered species. Half of American’s have no investments in equities, not even mutual funds. The top 1% holds more wealth than the bottom 95%… before the recent roll back of inheritances taxes. “Everyday people” in America do not invest in corporations. For most everyday people, their homes are their primary investments.
Studies find a direct correlation between income inequality and political polarization over the last 60 years. Unfortunately, it manifests itself daily in the erosion of norms around civility, truth telling, declining trust in our institutions and political dysfunction.
It is clear we need more real Main Street investors if we are to avoid plunging deeper into turmoil. One thing the Main Street Investors Coalition gets right is that real people have almost no ability to influence the decisions corporations make on their behalf.
We do need to change that. However, we cannot accomplish that by suppressing shareholder proposals and proxy advisors. Instead, we need to emphasize how real Main Street Investors can invest with our values, instead of despite our values.
Real Main Street Investors Need to be Involved in Corporate Governance
Contrary to Coalition pronouncements, there is no such thing as value-free economics or investing. When we abrogate our moral responsibilities, we tilt the rules away from citizens to entrenched insiders.
Common values must be created through open dialogue and elections, not by unaccountable individuals hidden behind dual-class corporate structures controlling our economy.
Although buying a mutual fund is investing, most mutual fund holders do not really identify with the companies mutual funds own. When I invest, I ask myself what the world needs and try to find public companies that fulfill that need.
Investing is just the start of a long-term relationship. Real Main Street investors should hope to hold forever and to suggest ways our companies can improve, either through shareholder proposals or in other communications with the company.
I recently read a wonderful little book, A Nation of Small Shareholders, about an NYSE campaign to get more Americans to feel like part of the capitalist system after WWII. It was a way to convince Americans that capitalism would offer them more benefits than communism. Since they felt like shareholders, they would also be more likely to favor lowering capital gains taxes. It was a nudge campaign before behavioral economics took hold. The NYSE knew what it wanted before they started and it was not fostering dialogue with real Main Street investors.
Today, America needs a campaign to make all Americans shareholders. It should emphasize the shareholder’s voice in shaping corporate impacts, as well at potential profits. The SEC should educate real Main Street investors about resources available to them in meeting their voting responsibilities as shareholders.
The New York City Comptroller recently joined a dozen other funds in announcing their votes in advance of annual meetings. Reviewing those disclosures is very helpful in making voting decisions. Proxy Insight compiles it all for a reasonable subscriber fee. We hope to get ProxyDemocracy back up and running as a free service. Meanwhile, you can always research them one-by-one through the Shareholder Action Handbook on CorpGov.net.
If the overwhelming majority of investors simply want to earn the highest return possible, regardless of impact, we are doomed as a society unless the Universe was meant to bend toward greed. I am convinced most real Main Street investors want to live in a civilized society on a salubrious planet.