- CII Staff
- Press Releases
Leading Investor Group Dismayed by SEC Proxy Advice Rules Leading Investor Group Calls for Action on Racism Amy Borrus to Become Executive Director of the
Council of Institutional Investors on July 1
CII Statement on Virtual Shareholder Meetings During Public Health Emergency CII Elects Board Members for 2020-2021, Approves Three Policies CII Spring Conference, March 9-11, Washington, D.C. Leading Investor Group Blasts SEC’s Proposed Rules for Proxy Advice and Shareholder Proposals CII Announces Advisory Council Members for 2020 Leading Investor Group Rebukes SEC for Proposed Rules That Undercut Critical Shareholder Rights Leading Investor Group Urges Companies to Commit to Long-Term Executive Compensation Council of Institutional Investors Board Appoints Amy Borrus to Succeed Ken Bertsch as Executive Director Media Advisory: CII Fall Conference, September 16-18, Minneapolis Council of Institutional Investors Responds to Business
Roundtable Statement on Corporate Purpose
Leading Investor Group Calls Out Directors Responsible for
Dual-Class Companies Without “Sunsets”
Leading Investor Group Petitions SEC to Require Clear Disclosure on CEO Pay Targets Council of Institutional Investors Says Lyft’s Planned Dual-Class Structure is Harmful to Investors Media Advisory
CII Spring Conference, March 4-6, Washington, D.C.
CII Statement on Share Buybacks CII Research and Education Fund Publishes
Guide to Disclosure of Board Evaluation Processes
Investor Group Applauds CommonSense Principles 2.0 CII Fall Conference, October 23-25, New York City Leading Investor Group Responds to President’s Tweet on Quarterly Financial Reporting Investor Group Responds to Wall Street Journal Editorial CII Applauds Shareholder Protections in House Bill CII Elects New Board, Names Florida SBA Executive
Director & CIO Ashbel Williams Chair
New Report Details Practical Steps Corporate Boards Can Take to Combat Sexual Harassment CII Applauds SEC Commissioner Jackson's Call for Listing Standards to Require Sunsets on Dual-Class Stock CII Spring Conference, March 12-14, Washington. D.C. CII Announces Advisory Council Members for 2018 CII Report Highlights Risks Associated with a Common Chinese Corporate Structure Institutional Investors Oppose Stitch Fix Dual-Class Structure but Welcome Sunset Provision Uber’s Governance — Investor Response Do Not Disadvantage US Investors on Research,
CII Asks SEC
CII Fall Conference, September 13-15, San Diego CII Welcomes S&P Dow Jones’ Decision to Ban New Multi-Class Companies from Key Stock Indexes CII Applauds FTSE Russell Decision to Set Voting Rights
Minimum for Inclusion on Indexes
Investor Group Urges Blue Apron to Ditch No-Vote Shares Institutional Investors Dismayed by House Passage of
Financial CHOICE Act
CII, Institutional Investors with $4+ Trillion in Assets Oppose
Anti-Shareholder Provisions of the CHOICE Act
- CII in the News
- Governance & Financial Information
- Join & Support
- Contact Us
Investor Group Responds to Wall Street Journal Editorial
Proxy Advisory Firms Do Not Dictate Voting OutcomesWashington, D.C., Aug. 13, 2018 — The Wall Street Journal’s recent editorial blasting what it calls “The Proxy Advisors’ Veto,” is factually incorrect on several counts.
“The Journal editorial uses the canceled merger of Rite Aid and Albertson’s as an excuse to attack proxy advisory firms unfairly for doing the work that institutional investors willingly pay them to do,” said Ken Bertsch, executive director of the Council of Institutional Investors (CII).
What the Journal gets wrong:
Herd voting is a myth: There is no compelling empirical evidence to support the assumption that proxy advisory firms encourage investors to vote as the firms recommend. In fact, the influence of the proxy advisory firms has declined significantly in recent years as asset managers, pension funds and others have taken greater interest in proxy voting and engaging companies directly, and have developed in-house expertise to address proxy-related issues.
Investor independence is clear in voting statistics. Although Institutional Shareholder Services Inc. (ISS), the largest proxy advisory firm, recommended voting against say-on-pay proposals at 11.8% of Russell 3000 companies in 2017, only 1.4% of those proposals received less than majority support from shareholders. Similarly, although ISS recommended voting against or withholding votes from the election of 10.8% of uncontested director nominees, just 0.2% failed to obtain majority support.
Proxy advisors generally recommend voting as management recommends: Companies and ISS made matching voting recommendations in the vast majority of ballots cast at public companies so far this year. In 89% of the more than 21,000 ballots cast in director elections, auditor ratifications, say-on-pay votes, and on employee and director equity plans at Russell 3000 companies, ISS endorsed management's proposals.
Even where ISS’s recommendation deviated from management’s, most notably with the 420 shareholder proposals voted this year (as of July 27), the outcome of shareholder votes supported management’s position far more often than ISS’s position.
To be specific, ISS’s voting recommendations on shareholder proposals conflicted with management’s in 79% of cases, and yet management still enjoyed a 90.5% “win rate:” a majority of votes cast by shareholders supported management’s position on 90.5% of shareholder proposals. Voting in proxy fights was the only exception to this trend. In the eight proxy contests this year, shareholders followed ISS’s recommendation more often than management’s blanket opposition.
More scrutiny of proxy advisors is fine, but proposed legislation is the wrong way to go about it:
Legislation approved by the House of Representatives would foist a new regulatory scheme on proxy advisory firms that would be excessively costly and burdensome, and would bias them in favor of corporate management.
The legislation, H.R. 4015, would require proxy advisory firms to share their research reports and voting recommendations with the companies that are the subject of their reports and recommendations before they share them with their paying customers, institutional investors. Giving companies the right to review proxy advisors’ work before it goes to actual clients is unprecedented interference in the commercial marketplace. It would encourage proxy advisory firms to skew their reports and recommendations toward companies rather than clients.
Click for PDF version. For media inquiries, please contact CII Deputy Director Amy Borrus.