Ning Chiu of Davis Polk has some useful data on proxy advisors and fund votes, supporting the conclusion that clients appreciate the analysis of proxy advisory firms but make their own decisions about shareholder proposals:
Funds must vote their proxies on behalf of 100 million shareholders in the aggregate and vote based on a range of factors that ICI outlined, including not only whether the objective of the proposal meets the funds’ goals and policies but also whether the proposal has appeared in past years and failed to pass, represents general interest of shareholders instead of the specific interests of the sponsors and whether the proposal would impose material costs in excess of any benefits. Company performance and the perceived quality of management may also play a role.
ICI provides data on how funds voted and wants to rebut claims that funds over-rely on proxy advisory firm recommendations. The data shows stronger alignment between fund voting and ISS recommendations for management proposals than shareholder proposals. For example, funds supported M&A proposals 97.7% of the time while ISS recommended in favor of such proposals 98.3% of the time. ISS supported director elections 93.1% of the time, and funds voted in favor of directors 94.2% of the time.
On shareholder proposals, ISS recommended for social and environmental proposals 55.4% of the time, but funds only supported those proposals 25.2% of the time. Overall, ISS was in favor of shareholder proposals 64.7% of the time, yet funds voted for them only 34.6% of the time. But average support for shareholder proposals during the 2017 season was 39%, which indicates that it would be highly useful for companies to know more about their shareholders if all non-retail investors, and not just funds, were required to report how they cast their votes.