from the Economist
“On April 28th shareholders in three big drug companies, Johnson & Johnson (j&j), Moderna and Pfizer, are set to vote on resolutions filed by Oxfam, a charity, that seek to widen access to covid-19 vaccines. In May Amazon’s shareholders are due to vote on a proposal from New York state’s pension fund, asking for an audit of the e-commerce giant’s policies on racial equity. Carl Icahn, a notoriously fierce corporate inquisitor, has broadened his attention from profits to pigs. He has filed proposals at McDonald’s and Kroger, a grocer, in a quest to end the confinement of pregnant sows.”
“Activists occasionally had broader goals. In 1971, for example, the Episcopal church demanded that General Motors cease making cars in apartheid South Africa.”
“BlackRock, Vanguard and State Street, three giant asset managers, last year owned 22% of the average company in the s&p 500 index of big American firms, up from 13.5% in 2008, according to Bloomberg, a data firm.”
https://www.economist.com/business/2022/06/02/why-proxy-advisers-are-losing-their-power
“Enter proxy-advisory firms, hired by investors to sift through the resolutions and make recommendations on which boxes to cross. There may be no monopoly in the market for ideas, but when it comes to proxy advice the market is a cosy duopoly. Institutional Shareholder Services (iss) and Glass Lewis meet more than 90% of the demand for such counsel in America.
The pronouncements of these corporate philosopher-kings grew in prominence after 2003, when new rules required American institutional investors to disclose their voting polices. For most investors it is cheaper instead to outsource the task to iss or Glass Lewis. The work is lucrative. In 2021 iss, which has annual revenues in excess of $250m, was bought by Deutsche Börse, a German exchange operator, for $2.3bn. The same year two Canadian public pension funds sold Glass Lewis to a private-equity firm.”
One study identified 114 institutional investors, representing more than $5trn in assets under management, who “robovoted” in lockstep with either iss or Glass Lewis during the 2020 proxy season, mechanically deferring to their recommendations.
Still, the advisers have almost certainly moved the needle in some important shareholder votes (and in plenty of unimportant ones, too).
On May 27th Twitter went further, announcing in a regulatory filing that it would ignore a shareholder vote which booted Egon Durban, a billionaire tech dealmaker, off the social-media firm’s board, citing the influence of proxy advisers on the result. iss had recommended evicting Mr Durban because he sits on six other public-company boards. That makes him “overboarded” in iss’s eyes. Twitter retorted that Mr Durban is a “highly effective member” with “unparalleled operational knowledge”. Merely sitting on more boards than the iss likes should not automatically disqualify him, the company implied.
Clashes pitting the proxy advisers against big investors, management and regulators look poised to intensify—all the more so if, as seems likely, agms continue to be a venue for some investors to push their politics. Asking two opaque firms, supposedly in the name of transparency, in effect to nominate America Inc’s boards of directors was dubious enough. Trusting them to resolve the complex trade-offs at the heart of 21st-century capitalism would be a travesty.
See also