October 29, 2018

How Major Investors Voted Last Year

This Proxy Insight article compiles annual voting data from the 10 largest mutual funds and compares how they voted on high-profile proposals (also see this Willis Towers Watson summary of recent stewardship reports). Here’s a couple highlights:

– The four biggest asset managers voted to ratify GE’s auditor – even though a shocking 35% of GE’s shareholders voted “against”

– For executive pay, Vanguard and State Street are following through with more stringent policies – and Goldman Sachs supported 8% fewer say-on-pay proposals than last year (and they’re not alone – as I recently blogged on, enhanced policies led CalPERS to vote against 43% of say-on-pay proposals this year)

Also, if your shareholder base includes pension funds, a recent study says you’ll have a harder time getting their support – even if ISS & Glass Lewis recommend in favor of the board’s recommendations. This article explains:

Pension funds were 36.2 percent more likely than mutual funds to vote in favor of shareholder proposals, and 7.1 percent less likely to vote for management proposals, according to finance and accounting professors Ying Duan, Yawen Jiao, and Kinsun Tam. “They are most supportive of shareholder proposals submitted by other public pension funds, followed by those submitted by labor unions,” the authors added.

Beyond being more prone to support other shareholders, pension funds were also likelier to vote against recommendations made by proxy advisors. According to the study, only two of the 48 funds — the Orange County Employees Retirement System an Oregon Public Employees Retirement System — always followed the guidance issued by their proxy firms.

Corp Fin’s “Financial Reporting Manual”: Now Mobile-Friendly!

Pretty exciting – Corp Fin’s “Financial Reporting Manual” is now available in easy-to-navigate HTML. The 383-page PDF remains available too.

“Outsider Trading”: Going Nowhere?

Over a year ago, Edgar was hacked – and we speculated about applying insider trading law to “hack & trade” schemes. This blog from John Stark – President of John Reed Stark Consulting and former Chief of the SEC’s Office of Internet Enforcement – outlines successful enforcement efforts under this theory from 2005 – 2016, and criticizes the lack of any more recent action. Here’s an excerpt:

Since the EDGAR data breach, the SEC has not brought any outsider trading cases — zero, zilch, nada – and the topic of outsider trading seems markedly absent from the current laundry list of SEC enforcement priorities and concerns.

Indeed, a recent NYT op-ed by SEC Commissioner Robert J. Jackson, Jr. and former SDNY U.S. Attorney Preet Bharara entitled, “Insider Trading Laws Haven’t Kept Up With the Crooks,” hinted at a significant rift within the SEC Commissioners about outsider trading, raising questions whether the SEC will file any future outsider trading cases ever again.

But this threat must be stopped. No longer are social security numbers, credit card information and the like the primary focuses of hackers. Information is the target – and public companies and the SEC in its EDGAR database have a lot of it. Indeed, crooks from anywhere in the world can now use their cyber-wares to orchestrate corporate espionage and remotely trade stock based on stolen secrets.

The SEC should get with the virtual program and redouble its efforts at policing outsider trading, an alarming and futuristic category of wrongdoing. The SEC has experienced first-hand the humility and alarm of playing the dupe in some offshore outsider trading scheme, and is clearly the best equipped to fight back. For more than 80 years, the SEC’s dedicated and vigilant enforcement staff has stood as a proud sentinel for investors, and SEC Chairman Clayton should cut the SEC enforcement staff loose and refuse to allow a preposterously strict reading of the ’34 Act’s broadly vested anti-fraud provisions to stand in its way.

Liz Dunshee