June 19, 2018
Yesterday, Bloomberg TV interviewed George David Banks, executive director of the Main Street Investors Coalition. Banks discussed the necessity of increasing the transparency of proxy advisory firms and the issues with environmental and social proposals. There is a disconnect between the biggest money managers and retail investors, Banks explained:
If the average retail investor knew that BlackRock and Vanguard were using management of their assets to pursue some type of political, social agenda that they didn’t agree with, they would really, really care about it, especially if that political social agenda actually hurt the value of the stock over the long run.
That’s where Main Street Investors Coalition comes in, working to engage proxy advisory firms and representing interests of retail investors that would otherwise be pushed aside.
In other news, Professor Joseph Kalt published a blog on Sunday explaining how the adoption of social and environmental shareholder proposals has no statistically significant impact on company returns – despite what activist shareholders claim. And in fact, these resolutions aren’t harmless. The proposals can cost millions of dollars and divert resources to goals besides shareholder returns.
Political, Social, and Environmental Shareholder Resolutions: Do They Create or Destroy Shareholder Value?
Harvard Law School Forum on Corporate Governance and Financial Regulation
Joseph P. Kalt
The increased use of politically-charged shareholder resolutions has garnered considerable attention in recent years, as shareholder meetings have become venues for discussion and debate regarding corporate positions and actions on issues of the day. Recent proxy seasons have seen corporate management being asked to address issues as diverse as deforestation, corporate clean energy goals, climate change, the uses of antibiotics and pesticides, political contributions, human rights risks through the supply chain, indigenous rights and human trafficking, cybersecurity, the development and reporting of sustainability metrics, and tax fairness. As we show, this change has both expanded the number of resolutions to which a given company may be required to respond and broadened the range of issues that boards and senior managers are being asked to address.