July 21, 2017

Proxy Voting: Increase in Directors Getting “No” Votes

It looks like investors used their votes to send a message to some directors during this year’s proxy season – and it wasn’t “keep up the good work.”  This excerpt from a recent Bloomberg article explains:

Shareholders have withheld 20 percent or more of their votes for 102 directors at S&P 500 companies so far this year, the most in seven years, according to ISS Corporate Solutions, a consulting firm specializing in corporate governance. While largely symbolic, the votes at companies such as Wells Fargo and Exxon Mobil are recognized as signals of displeasure and put pressure on boards to engage.

“Institutional investors are becoming more actively involved in communicating displeasure through their votes,”said Peter Kimball, head of advisory and client services at the consulting firm, a unit of Institutional Shareholder Services. “Voting against directors at large-cap S&P 500 companies is a way for an institution to send a signal to other, smaller companies about the actions that they don’t like. That feedback trickles down.”

We’ve previously blogged about Blackrock & State Street’s increasing assertiveness when it comes to pushing for board action on their priorities – and their greater willingness to use their voting clout to send a message to boards that aren’t responsive.  The results from this proxy season suggest that other institutions may be taking the same approach.

Boards: What Do Proxy Advisors Want in a New Director?

I’m trying not to take this personally, but according to this recent  “Directors & Boards” article, I’m everything that proxy advisors don’t want when it comes to new director candidates – “male, pale & stale.”  So who do proxy advisors want instead of me?  Here’s the article’s answer:

If proxy advisors – the firms that provide public company research and guidance to large investors – were writing a personal ad for the perfect board director it would probably go a bit like this:

Looking for diverse director with integrity who enjoys face-to-face communication with investors.

That profile is based on new report from “The Conference Board” called “Just What is a Director’s Job?” The report was the product of a roundtable of more than 50 proxy advisors, including ISS & Glass Lewis. The description of the proxy advisors’ “dream date” highlights not merely the growing importance of board diversity, but also the central position that shareholder engagement plays in their views about what makes a good corporate director.

Secret Societies: The Illuminati, Knights Templar & “The Big Four”?

Pretty interesting stuff in this European Parliament group study on the “opacity” of the organizational structure of the Big Four accounting firms.  According to the study, nobody knows how many offices the Big Four have, exactly where they’re located, how many people work for them, or how their ownership is structured.  Why so secretive? The study says that the Big Four have their reasons:

We suggest that the structure adopted by the Big Four firms of accountants, which at one level suggests the existence of a globally integrated firm and at another suggests that they are actually made up of numerous separate legal entities that are not under common ownership but which are only bound by contractual arrangements to operate common standards under a common name, has been adopted because it:

– Reduces their regulatory cost and risk;
– Ring-fences their legal risk;
– Protects their clients from regulatory enquiries;
– Delivers opacity on the actual scale of their operations and the rewards flowing from them.

The study was released by a left-leaning group of members who serve on the European Parliament’s Panama Papers inquiry committee.  Anyway, who knew that your mild-mannered independent registered public accounting firm was playing such an integral role in bringing about the “New World Order”?

John Jenkins