Frequently Asked Questions

Q: Who are Main Street investors?

A: Main Street investors are America’s retail investing community, a group of over 100 million Americans who invest primarily through their 401(k)s, as well as millions more who own other individual retirement accounts or participate in public or private pensions. Collectively, these investors hold over $16.9 trillion in assets, with stakes in nearly all publicly listed companies.

Q: Why do we need this coalition?

A: Although Main Street investors control the single largest pool of equity capital in the world, they have virtually no ability to influence the way their money is being spent, and no say whatsoever on how shareholder proposals are being voted on in their name. That’s because most retail investors typically own shares in companies through a mutual fund within their 401(k), or individual retirement accounts or pension funds. If a retail investor is unhappy with how their money is being managed, or concerned the fund managers might be prioritizing pet political causes at the expense of generating optimal returns, currently there’s not a whole lot they can do about it. The goal of the Main Street Investors Coalition is to give these investors a voice in determining how their money is being leveraged.

Q: Am I considered a Main Street Investor?

A: Most Main Street investors have money set aside in an investment, pension or individual retirement account to save for the future. In total Americans held some $28.2 trillion in U.S. retirement assets at the end of 2017. An estimated 54 million people invest in a 401(k) plan, representing approximately $5.3 trillion in assets for instance, while public pension plans manage over $3.6 trillion on behalf of government workers and retirees.

A large portion of this money is invested in mutual funds, either in active funds, or increasingly in passive vehicles such as index funds, which are designed to track the returns of the broader market. So, chances are 1) you’re absolutely a Main Street investor, whether you know it or not and 2) your money is being used, spent and leveraged in ways that would probably surprise you – but which at present you have no real ability to evaluate, or otherwise influence.


Q: If I hold stock in a mutual fund do I have a say in how those funds vote on company proposals?

A: Once an individual investor has made the decision to invest in a mutual fund, they forfeit their vote on individual stocks to the entity managing their investment. Main Street investors do get to vote on board members and other administrative matters for mutual funds on occasion, but as many of these funds have hundreds of thousands – if not millions – of members, there is rarely any coordinated shareholder action at meetings.

Q: Are funds managers obligated to invest my money and vote on proposals in a way that optimizes returns for my retirement?

A: Not really! Of course, fund managers will never admit that – they’ll always say that the motivation driving every decision they make with your money, every company or project they’re investing in, every shareholder proposal they’re voting on, is all about generating higher returns. But there’s really nothing on the books currently that forces them to justify or explain their votes, or even let anyone know they decided to cast them!

Q: Who can put forward shareholder proposals?

A: Shareholder proposals, resolutions that are voted on at annual shareholder meetings, can be put forward by a company’s management or individual shareholders. To submit a proposal, a shareholder must own at least $2,000 in market value or 1 percent of a company’s outstanding stock for at least one year. They must continue to hold those shares through the meeting date.

Q: How many shareholder proposals are there on average every year?

A: In the United States, shareholders submitted approximately 827 proposals in 2017. In 2016 and 2015, 916 and 843 proposals were submitted respectively. These cover a range of subjects, from pure corporate governance issues, to topics less tied to company performance, such as political donations and environmental and social disclosures. In addition to shareholder proposals, there were 138 activist shareholder campaigns targeting board members at US companies in 2017.

Q: How does politically-driven shareholder activism impact the broader market?

A: Increased politically-motivated shareholder activism has contributed to the United States having less than half the number of publicly traded companies it did 20 years ago, as new companies see restrictions on their ability to operate and instead seek funding from private sources.

This evolution, along with the number of initial public offerings falling by more than 50 percent, has left Main Street investors with a smaller pool of businesses they can invest in, and fewer opportunities to back the brightest and most innovative new ideas coming to market.

As the Chairman of the Securities and Exchange Commission Jay Clayton put it, “The reduction in the number of U.S.-listed public companies is a serious issue for our markets and the country more generally. To the extent companies are eschewing our public markets, the vast majority of Main Street investors will be unable to participate in their growth. The potential lasting effects of such an outcome to the economy and society are, in two words, not good.”

Q: How does shareholder activism impact my shares in public companies?

A:  Public companies often bear the brunt of shareholder-led campaigns, which are frequently aimed at delivering political and social objectives instead of maximizing performance. Forcing companies to pursue initiatives that may not enhance value creation requires management to devote a significant amount of resources to respond to shareholder proposals, which might otherwise be used more effectively elsewhere.

Recommendations by proxy advisory firms can also sway decisions on shareholder proposals, despite concerns about conflicts of interest and accuracy. According to the National Investor Relations InstituteAlthough the proxy firms’ influence varies by company and subject matter, governance experts have found that a negative proxy advisor recommendation can lead to a 15 to 30 percentage point differential in support for management.”


Q: What role do proxy advisory firms play in impacting my investments?

A: The role of proxy advisory firms has evolved in recent years, with firms like Institutional Shareholder Services and Glass Lewis having greater impact on a wide range of issues. These firms provide research and recommendations on proxy proposals, proxy contests, compensation issues and the management strategies voted on at company annual and special meetings.

While proxy advisors update their voting operating guidelines annually, their votes are not always tied to value. As Robert Daines, Law Professor at the Rock Centre for Governance at Stanford University in California noted, “We found no evidence that their advice helps shareholders. We found no evidence that the firms they believed to have ‘good governance’ actually had higher returns, market valuations, fewer lawsuits, or other outcomes that shareholders would like. There was some evidence that the firms they considered to be well governed did worse on this score.”

Q: Do proxy advisory firms own any shares in the companies they make recommendations on?

A: No. This lack of accountability, financial or otherwise, is one the reasons the Main Street Investors Coalition is calling for reform.

Q: Do proxy advisory firms have conflicts of interest?

A: Proxy advisory firms perform numerous roles, providing consulting services on corporate governance or executive compensation matters, as well as qualitatively rating issuers’ corporate governance structures, policies, and practices, and assisting clients to improve their own governance ratings.

The U.S. Securities and Exchange Commission has acknowledged a possible conflict of interest between these services, commenting that “some proxy advisory firms provide vote recommendations to institutional investors on matters for which they also provided consulting services to the issuer… It is our understanding that at least one proxy advisory firm provides a generic disclosure of such conflicts of interest by stating that the proxy advisory firm ‘may’ have a consulting relationship with the issuer, without affirmatively stating whether the proxy advisory firm has or had a relationship with a specific issuer or the nature of any such relationship.”

The National Investor Relations Institute has reached a similar conclusion: “Despite their significant influence, proxy advisors remain largely unregulated, while substantial concerns have been raised by companies and academics about: (1) a lack of transparency concerning their standards and methodologies; (2) the risk that their voting recommendations may be based on incorrect information; and (3) the conflicts of interest posed by several of their business practices.”