Proxy advisory firms lack transparency and their recommendations are not always in shareholders’ interests. However, despite their poor performance, the two biggest firms’ market dominance has never been challenged. This is a market failure that warrants a change in regulation, Professors Steven N. Kaplan and David F. Larcker argue.
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Institutional investors that own between 70 and 80 percent of the market value of US public companies often rely on investment advisers voting on behalf of clients. The SEC and corporate executives are willing to curb the power of the two largest proxy advisory companies, ISS and Glass Lewis. In a new episode of their podcast Capitalisn’t, Kate Waldock and Luigi Zingales discuss the new proposed regulation with SEC commissioner Robert Jackson.
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SEC Chairman Jay Clayton claimed that the draft regulation on shareholders’ votes and proxy advisory firms received approval by hundreds of “Main Street” Americans. A Bloomberg investigation reveals that many of the letters that the SEC published on its website are fake. This reform could change American capitalism. We deserve more serious debate.
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A new SEC proposal regarding proxy advisors will make it harder for shareholders to vote against CEOs’ preferences. However, there is a 60-day period to comment and propose amendments to the new regulation. Please send your comments to the SEC and to ProMarket as well. We will publish the best of them on our website.
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SEC Commissioner Robert Jackson dissented from his SEC colleagues’ proposal on how to reform proxy advisors regulation. New rules, he argues, would introduce a tax on firms who recommend that shareholders vote in a way that executives don’t like. Jackson’s analysis also shows that the proposed changes will remove key CEO accountability measures from the ballot.
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In a new episode of their podcast Capitalisn’t, Kate Waldock and Luigi Zingales discuss one of the most hated industries of America: private equity. Democratic presidential candidate Elizabeth Warren has a plan to curb its abuses, but can it work?
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The company failed to go public and its founder, Adam Neumann, had to step down. This is good news: ordinary investors refused to put money in a firm that is purely loss-making and killed Jamie Dimon and Masayoshi Son’s plans.
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More and more startups are valued at over $1 billion, even if they have dysfunctional corporate structures and hazardous business models. For tech companies, going public might prove much more difficult than before.
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Despite the media hype about corporate CEOs having abandoned their shareholder value maximization credo, the recent statement from the Business Roundtable contains nothing new of substance. CEOs still firmly convinced that their firms’ main goal remains to maximize shareholder value could sign it without batting an eye.
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The Big Three index fund managers—BlackRock, Vanguard, and State Street Global Advisors—hold a significant proportion of the stock of US public companies, and they continue to grow steadily. There is a real prospect that index funds will continue to grow, and that voting in most significant public companies will come to be dominated by the future “Giant Three,” write Lucian Bebchuk and Scott Hirst.
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Research has shown that studying the causes and implications of management across organizations can be of much benefit to economics.
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In the past five years, thanks to growing public pressure, there has been increased attention on the voting behavior of asset managers. As a result, change is already taking place.
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