Washington DC Cityscape
The Committee on House Financial Services April 29th Hearing entitled “Report of Counseling Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Counseling Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Advisory Counseling
It’s time.
The attorneys consulting companies exist because the Securities and Exchange Commission requires institutional investors to vote all matters raised in proxy statements or measures voted during shareholders’ meetings. For most institutional investors who maintain all issues that arise during shareholders’ meetings are overwhelming, so they are turning to attorney consulting for help. Power consulting companies help institutional investors manage this Herculean project. They do the work of the legs and advise institutional investors on how to vote on the thousands of shareholders’ resolutions that arise each year.
Two attorney consulting companies – ISS and Glass Lewis – Control 97% of the market. Given the enormous volume and importance of the proxies every year, these two companies have gained a huge influence on corporate governance.
Unfortunately, ineffectiveness affect the consulting market. As environmental, social and governance (ESG) give an example, these ineffectiveness weaken corporate governance at the expense of effective management.
While the pressure to apply ESG programs has been slowly decreased, many ESG programs Continue to grow Through shareholder proposals that include requirements for reporting companies’ greenhouse gas emissions. When it comes to ESG proposals, the two major attorney consulting companies establish their position without sufficient transparency and use an approach to a size that fits all the enormous differences that ESG programs can have in different companies.
As a result, their ESG recommendations can be detrimental to many companies. For example, when examining the influence of attorney consulting companies, the US Council to create capital He concluded that ESG’s recommendations by attorney consulting companies, in particular “disadvantages of small and medium -sized companies, in favor of largest companies that have resources for compliance”.
The consulting double of the proxy also has an incompatible conflict of interest, because both ISS and Glass Lewis are lending their own ESG programs. The ISS has a program known as ISS ESG that, according to their website, it provides “ESG Screening, Ratings and Analytics designed to allow investors to develop and integrate responsible investment policies and practices into their investment strategies.” Glass Lewis has formed a strategic collaboration with SustainlyTics and actively integrates ESG principles into the voting recommendations.
In a different way, the most important consulting companies of attorney control 97 % of the attorney consulting have a predetermined belief that Pro-ESG proxy statements must be supported. This inherent prejudice in favor of ESG programs is alarming given the actual performance of ESG.
Several studies have documented that ESG -related attorney measures usually harm financial yields. One study at Newspaper of economic economy He examined the impact of public activist pension funds on the market values of a sample of Fortune 500 companies finding that increased activism from public pension funds is negatively linked to stock yields. In addition, businesses that received proposals from public pension funding activists promoting social agendas were estimated by 14 % lower than similar companies without such agendas. Another study from Manhattan He found that public pension activism promoted by attorney consulting adversely affects the value of the share.
The claim that the shareholders voted for the proxy measures, so the company simply listens to the wishes of its owners, also hollow rings. The majority of the “shareholders” who vote on these proxies are institutional investors who simply vote for the recommendations from the ISS and Glass Lewis. These effects are worsening when institutional investors automatically adopt the establishment of the attorney consulting without further control-a practice referred to as a Robo vote.
Empirical results indicate that ESG programs are harmful to corporate performance and rarely achieve their high goals. The predisposition of attorneys to promote these programs positively demonstrates a significant disconnection between advice from attorney consulting and the potential financial interest of the company. The issue of ESG is an example for which fundamental reforms in the power market are justified.
The primary objective of reforms must be to better align the interests of the attorney consulting companies with the interests of the shareholders of the Fund. These reforms should include ensuring that the attorney consulting companies are acting in a manner that promotes the confidence responsibilities of capital administrators in shareholders, in creating greater transparency in consulting businesses and conflicts of interest in interest in interest in interest in interests of interest in interested in their recommendations.
While they are now plagued by poorly aligned incentives, attorney consulting companies play an essential role in financial markets. But the market must be structured properly. Definition of defects passing through the current market is an opportunity that 119th Congress should not let it slip.
