Maybe Proxy Advisory Firms Have Too Much Clout

A major debate is opened, as the SEC convenes a roundtable. Is there something amiss when two entities – Institutional Shareholder Services and Glass Lewis – that own no stock and are (so it is argued) understaffed and sometimes uninformed, can have so much influence over votes that determine the fate of corporations valued, together, in the trillions of dollars? It’s a question ripe for the asking, but some dispute its premise. One participant, the general counsel of Viking Global Investors, denies he pays the advisory firms much mind and says the more contested the vote, the less likely he is to do so. Chair of the SEC Mary Jo White said she is “particularly interested in the discussion of conflicts of interest that may or may not arise in connection with the participation of proxy advisers in our system – what they are and views on how they should be addressed.” Some critics see a potential conflict scenario, not unlike the one that has overtaken the ratings agencies, out of the fact the advisory firms sell governance consulting services to companies in addition to making voting recommendations to company owners.