A Vote in Favor of Balance and Care in Policies Regarding the Use of Proxy Advisors
Each Spring, between April and June, many investment advisers receive proxies relating to hundreds (or perhaps thousands) of companies held in their clients’ portfolios. Advisers are asked to vote on a variety of management-sponsored proposals relating to traditional matters of corporate governance, including advisory votes on executive compensation, as well as shareholder proposals encompassing board terms and independence, social and political spending, and environmental matters, among others.
The dominant role of proxy advisory firms in shareholder democracy, their opaque nature, and potential conflicts of interest have been the subject of US Securities and Exchange Commission (SEC) and Congressional inquiries recently, as well as the focus of non-US regulators. This article discusses recent developments relating to voting of proxies by investment advisers, and other fiduciaries, and suggests that policies addressing the role of proxy advisors in the voting process should be the subject of careful consideration and reflection.