SEC Should Leave Proxy Advisory Firms Alone – Bloomberg

The biggest problem with the idea that the proxy advisers need to be reined turns on the fallacy that they are all powerful, something critics repeat a lot. They are not. Just one example, according to a stat in the Wall Street Journal, is that last year proxy advisory firms urged shareholders to vote against approving the paychecks of 12 percent of the companies they followed. In nearly all of those cases, the pay packages were approved anyway…Imagine if Hollywood studios banded together and demanded that Rotten Tomatoes be taken down, or worse somehow outlaw movie reviews. Yes, good reviews drive viewers to theaters, but Hollywood creates far more clunkers that they would rather viewers didn’t have advance word about.

It’s the same with proxy advisory firms. Yes, at times they can help companies fight off activist investors that are needlessly trying to throw out a board, but in general corporations win shareholder votes anyway, proxy firms or not. Large shareholders, which often have some other business ties to large corporations, like managing their pension or 401(k) plans, often have their own conflicts.

Source: SEC Should Leave Proxy Advisory Firms Alone – Bloomberg

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s