CEO funded fake dark money front group American Council on Capital Formation hired a partner at a DC law and lobbying firm, Squire Patton Boggs (actual slogan: Local connections, global influence) to produce a report on proxy advisory firms. It concludes that proxy advisory firms sometimes make mistakes and do not give the companies they cover enough time to respond with comments and corrections. But the key takeaway from this bespoke “study” from a law firm with no expertise in statistical analysis or peer review process is its own conclusion that: “[T]he relatively small data set (and the non-random survey methodology) do not allow statistically significant conclusions to be drawn.” We also note that the determination of what is “enough” time to respond is highly subjective, self-reported and easily inflated. We also note that the error rate the study finds is about one percent, and we challenge the member companies of ACCF funders, including the National Association of Manufacturers, to do as well.
The response from ISS:
ISS clients vote their views and do so in an informed and timely manner that factors in a variety of inputs including data and analytics available upon publication of ISS’ benchmark research. Nearly nine in 10 shares voted by ISS on behalf of its clients are tied to custom policies created by our clients and not by ISS, and ISS has no discretion to determine a vote decision in the absence of a client’s instructions on a given ballot item.
Despite the misleading assertions in this paper, ISS has strong fact-checking protocols and a lengthy track record for accuracy. In calendar 2017, ISS covered over 6,400 meetings in the U.S. and more than 38,000 meetings worldwide. The error rate, as defined by the publication of research Alerts resulting in a change to ISS’ initial recommendation, was under 1 percent (0.76 percent).
Proxy advisers are valued by investors, who hire and retain firms like ISS for our expertise, thorough research and analysis, and unbiased recommendations. Importantly there is no requirement that investors follow the recommendations of proxy advisers.
It’s no surprise that the ACCF, a corporate lobbying group and key backer of the Main Street Investors Coalition that is campaigning to hinder the rights of shareholders, has commissioned a paper that advocates for weakening the current system that protects the flow of information and research between proxy advisers and their investor clients, a system intentionally kept independent from influence by the very companies being analyzed.
And from Glass-Lewis:
UPDATE: The same law firm has contributed an opinion piece to The Hill, materially misrepresenting the extent to which fund managers “rely” on proxy advisory firms and omitting the key conclusion that the data “do not allow statistically significant conclusions to be drawn.” In other words — it’s anecdotal, subjective, self-reported, and meaningless.