The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here’s a note from Sarah Wilson, CEO of Manifest (a proxy advisor in the UK) about the proxy advisor reform bill pending in the House that I have blogged about several times on “TheCorporateCounsel.net Blog” (here’s the latest):

Remember that so few companies have failed to earn majority support for say-on-pay in the United Kingdom because the proxy advisors there drive the process in a way that companies know what likely will pass – and what won’t.

The issue is that “yes, the investor group guidelines are largely public – but not everyone thinks they are good and have their own views” but more importantly in the UK, we just don’t need to resort to voting against because although we have a very pro-shareholder legal framework:

– Voting isn’t mandatory per ERISA
– Most votes are binding and so therefore very robust – we CAN get rid of a director with a single AGM vote rather than wonder why after 4 votes nobody is doing much about it
– Company law rights haven’t been watered down by the securities regulators because company law is a separate branch and firmly embedded with common law
– Investors would rather solve problems through engagement
– In the UK, we have 2 vendors who are non-recommendations focussed, Manifest and IVIS.

Then there is the concern about: “We should at least worry that their advice might fail just like the advice of the credit ratings agencies failed.” Well, if the law passes, then you effectively get issuer control over research – which is exactly why credit rating agencies DID fail.

Oh the irony, Citizens United gives corporations free speech – but not the critics of the corporations. But the biggest question mark that I have is just where do companies get off with interfering with asset owners and asset managers freedom to choose and freedom to contract. And, as we have with common law, the freedom of quiet enjoyment of property rights? (Voting is a property right under UK common law). This is an infringement of an investor’s human rights (yes, investors have human rights as well as humans).

The proxy advisor reform bill is a truly ill-considered SLAPP suit and deserves to be exposed for what it is – a cowardly piece of lobbying by the Chamber of Commerce which daren’t criticize asset owners and managers, the providers of their capital.

Also see this blog from the CFA Institute railing against this House bill…