Main Street Investors and Its Affiliate Keep Trying, Keep #Failing

Two recent articles from the Main Street Investors Coalition and its affiliate, The American Council for Capital Formation, and our responses:

The affiliate of the corporate-funded, lobbyist-led, climate change-denying, fake front group for corporate CEOs, the Main Street Investors Coalition, is run by the same director, funded by the same corporations, and has a similarly obfuscatory name: the American Council for Capital Formation. MSIC is about going after proxy advisors and their clients; ACCF is about going after public pension funds (I know, I’d think that “capital formation” would mean being in favor of the providers of capital, too). In both cases they are funded by millions of shareholder dollars to prevent/thwart shareholder oversight, particularly regarding climate change.

The Harvard Law School Blog on Corporate Governance and Financial Regulation has an article by ACCF’s Tim Doyle arguing that ESG ratings are imperfect and even subjective. Our response:

The deceptively public-minded name of this organization is intended to obfuscate its real funders (corporate executives) and its real goal, preventing oversight by large, sophisticated financial institutions managing millions of shares of stock as fiduciaries for beneficial holders. ESG ratings are still developing. They must rely on limited and often misleading disclosures by companies, which is why this organization and its affiliate, the similarly obfuscatory Main Street Investors Coalition are really all about suppressing shareholder votes through lobbying and misleading arguments and slanted “research” instead of improving disclosure to make ESG ratings more effective.

In any event, all securities analysis is subjective. No matter how much math is involved, the selection and weighting of data points is qualitative. That’s what makes markets. The question is whether large, sophisticated investors find it to be of value compared to the (completely biased and unreliable) rankings of the ratings agencies or the (usually biased) recommendations of securities analysts. If they want any or all of these things to help them make their decisions, and if they have to submit or support shareholder resolutions calling for more disclosure to make them even more valuable, it is not the business of a fake front group like this to tell them “pay no attention to the man behind the curtain.”


Nan Bauroth, who serves on the Advisory Council of the Main Street Investor Coalition, has a piece in Breitbart’s Daily Caller making the same already-discredited claims about the group. Having the same points made by yet another person does not make them any more valid. And we will keep responding any time they do. Bauroth, whose LinkedIn profile’s top item is ghostwriting op-eds and business books as well as writing under her own name on business productivity, admits that her only connection to the “Main Street” retail investors the group claims to represent is that she owns stock. She claims legitimacy as a “mom and pop investor” but being a stockholder does not give her the right to speak on behalf of retail investors just as wearing a sweater does not make her an expert on fashion or manufacturing.

Barouth has no record of or expertise in shareholder rights. The group’s agenda has not been endorsed by any individuals or groups who do have a reputation in this field. Her parroting of the MSIC talking points is further proof that she either does not understand the issues or is more interested in promoting the group’s anti-shareholder agenda than in protecting the rights of retail investors like herself.

She also repeats the “Who, us?” claim that MSIC never attempted to hide its true identity as a front group for the National Association of Manufacturers, which, like MSIC is not exactly what its name suggests. Journalist David Sirota describes it as a “corrupt, partisan wing of the Republican apparatus whose leadership often uses NAM’s resources against the interests of the majority of NAM’s own members.” It is a Koch Brothers affiliated anti-environmentalist lobbying group that even Duke Energy found to be too extreme. It opposes donor disclosure and sanctions on Russia. And yet, through front groups like MSIC and ACCF, it is all about pushing for disclosure and preventing conflicts of interest when it comes to groups it feels threatened by, like proxy advisors.

The group calls itself Main Street Investors Coalition, though it has no connection to Main Street and is not a coalition of investors. This is intentional obfuscation and no amount of “we never pretended to hide what we are and it is not a scoop for the New York Times to out us as a fake front group” can disguise. Continuing to pretend that this was not the intention does not add to the group’s credibility. Neither do their slick K Street graphics, their refusal to respond to questions, and their unwillingness to admit that what they really care about is not letting shareholders even raise the question of sustainability (a taxonomic concern for strategic planning).

She writes:

I joined the Main Street Investors Coalition because I believe proxy advisory firms, large institutional investors and public pension funds are operating in ways that harm the financial well-being of millions of American retail investors like myself, and I am trying to serve as a voice for others who feel the same….The Coalition’s ultimate point is that the paramount duty of money managers must be maximizing the return on shareholder investments.

Fortunately, the paramount duty of money managers as a matter of law, regulation, and economics is maximizing the return on shareholder investments. And, as we keep pointing out,

The 5050 Climate Project found that approximately half of top asset managers opposed more than 50 percent of key climate-related proposals in 2017, and several top managers voted against more than 85 percent of key climate proposals. Eight of the top ten asset managers failed to support key climate votes more than 50 percent of the time. At the very least, this shows that the institutions MSIC is so shrill about are reviewing the proposals carefully and making distinctions between those they do and do not want to support. Climate-related proposals, which, we emphasize, are not binding on the company even with majority vote, were filed at just 62 companies this year out of the thousands of publicly traded corporations. And yet the prospect of these proposals is so terrifying to corporate CEOs they have to create a fake group to fight them. Maybe it’s just us, but that seems to indicate that their personal and financial interests may be contrary to long-term shareholder value and that they know they cannot win by responding on the merits.

She writes:

Toward that end, one of our primary goals is to empower retail investors by enabling them to more easily vote their ownership rights. Although the article admits this is a laudable goal, it blithely concludes that since individual shareholders have not shown much interest of doing so in the past, there’s no point trying to encourage them to do so in the future — a perfect example of circular, self-fulfilling logic.

Our response: Retail investors have the right to vote shares if they wish, even those held by managers, via platforms like FolioInvesting, an outstanding service founded by a former SEC Commissioner. We encourage Barouth to open an account so she can vote her own shares. We also encourage her to check out the N-PX filings due this month so she can review the proxy voting records of her current money manager and the competition and select one that suits her priorities, perhaps those who voted against 85 percent of the non-binding shareholder proposals on climate change. [ValueEdge Advisors Chairman Robert A.G. Monks created the initiative that produced this regulation after 14 years of raising it regularly with the SEC.]

Most important, it is entirely inconsistent for Bauroth to say on the one hand that individual shareholders are smart enough to vote their proxies, but not smart enough to decide to delegate that authority to the same people and for the same reason that they delegate the buy/sell/hold decisions — expertise and resources, including the reports of independent sources like proxy advisors. Why shouldn’t the retail investors she purports to advocate for be allowed to assign proxy voting rights to the same people who are tracking the portfolio companies every day?

MSIC continues to cite its flawed, slanted, subsidized “studies” and ignore the actual data. They continue to pretend that their agenda is about something other than suppressing the votes of shareholders smart enough to evaluate proxies and big enough to have an impact, shareholders who are subject to the strictest fiduciary standard imposed by law, whose votes must be disclosed (you’re welcome), whose actual voting records show a cautious, highly specific assessment of shareholder proposals which are in any event not binding on the company, even if there’s a 100 percent vote in favor.

A bit of history here: a major reason for the switch from defined benefit retirement plans under ERISA, which at one time presented both the largest asset and the largest liability for many American corporations, was that the Labor Department said it was inappropriate for corporate executives to direct that the proxy votes of ERISA funds be cast in favor of corporate proposals that were not in the interest of the beneficial holders/shareholders. If they couldn’t control the votes, why control the pension plan? So, everyone switched to defined contribution plans, hoping to divide and conquer on proxy votes. Now that fiduciary money managers are occasionally voting against management on issues like excessive pay and climate change, corporate executives want to change the rules again. They love shareholders in theory; they just want them to vote YES on all management proposals and NO on shareholder proposals. The fact that they already do this most of the time, and that shareholder proposals are advisory only is not enough.

The record of proxy votes by individual investors is poor. Most don’t vote. MSIC’s own graphics show only 29 percent voted their proxies last year, and those are for shares where they have direct control and generally know something about the company.  The group that purports to advocate for Main Street investors wants to take away their right to delegate proxy voting authority to the people with experience, expertise, and resources and who are obligated as fiduciaries and subject to strict regulatory oversight.  These are people who do recognize the value of the vote and, unlike individual investors, they do vote, overwhelmingly as management recommends (and the proxy advisors do, too).  MSIC has been unable to come up with a single example of a proxy vote that they consider unsupportable.  There were only 62 climate-related proxy proposals at the thousands of public companies last year.  Only three have ever received majority support. Zero were binding on the companies, which had no obligation to comply. The MSIC’s claims of rampant “political” votes contrary to economic value and detriment to corporations are completely unfounded to the point of irresponsibility — or lies.

VEA Vice Chair Nell Minow testified at an SEC hearing on the subject that included proposals to make the proxy mailings more colorful as a way of encouraging more votes. We don’t want investors to vote because the proxy is colorful. We want investors to vote because they have carefully studied the issues, and the best way to make sure that happens is to let investors decide for themselves that they want to entrust their votes to the same people they trust with their retirement investments.

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