Does Proxy Advice Allow Funds to Cast Informed Votes?

Our examination of the votes cast by 155 mutual funds on over 6 million corporate election items during 2004-2017 led us to a surprising conclusion: We found that Institutional Shareholder Services’ (ISS) proxy advice did not lead funds to vote as if they were informed – more often than not it pushed them in the opposite direction.

The purpose of proxy advice is to allow funds to cast their votes as if they were informed, without having to actually become informed. Given the centrality of proxy advice in today’s corporate elections, the viability of shareholder democracy hinges on the advice’s … Read more

The Competitive Landscape of the Proxy Advice Market

Despite long-standing efforts to understand the proxy advice market, there is no way to identify the firms that supply specific investors with proxy advice, making claims about market shares conjectural at best. Nevertheless, it is widely believed that ISS and Glass Lewis control 97 percent of the market. However, ISS itself refutes this figure, saying it “is not a statistic we have verified or can confirm”. [1] In a new working paper, I use a largely unnoticed feature of regulatory filings to identify mutual funds’ voting platforms. I then provide what may be the first detailed depiction of the … Read more

Why Proxy Advice Might Be Slanted

In the last two decades, the proxy advice market has consolidated into two companies that some believe control as much as 97 percent of that market, leaving little diversity in available advice. The companies, ISS and Glass Lewis, are opaque about the bases for their recommendations, and critics accuse them of offering simplistic one-size-fits-all solutions that do not increase shareholder value. [1] Complicating matters, investors don’t always agree on what sort of advice they want, especially when it comes to social issues: Traditional funds and socially responsible investors (SRI) disagree about whether firms should sacrifice profit for social goals. … Read more