April 22, 2019

Proxy Advisors: What Do (Real) Retail Investors Think?

As we’ve previously blogged, much of the clamor for proxy advisor regulation on the part of “main street” investors has been coming from the “Main Street Investors Coalition” – an organization that is essentially a sock puppet for the U.S. Chamber of Commerce & the National Association of Manufacturers.

It looks like we may finally have some data on what real retail investors actually think. That’s because Spectrem Group recently surveyed over 5,000 retail investors to get their views on proxy advisors.  And guess what? If you buy into the survey’s results – which not everybody does – it appears that the sock puppet may have had its finger on the pulse of retail investors all along. Here’s an excerpt from the intro:

The results of an extensive survey of 5,159 retail investors points to a growing disconnect between the expectations of those everyday investors and the increasing influence of proxy advisors, companies that provide voting services to the investment firms managing retail investor money. The survey presented here directly asks retail investors about issues raised in the debate over proxy advisory firms, revealing retail investors’ level of concern with fundamental flaws in the proxy advisor industry, including, but not limited to, conflicts of interest, robo-voting and insufficient transparency.

The increased focus of fund managers and proxy advisors on political and social activism, rather than maximizing returns, is out of sync with the expectations of ordinary investors. This practice has the potential to negatively impact returns for all retail investors by increasing the burden on public companies with no clear link to shareholder value. The absence of the inclusion of retail investors in the proxy process – as demonstrated by the participation levels and their inability to influence institutional shareholder voting – means that the voice of retail investors, who own 30 percent of public corporations in the United States, is being drowned out.

In terms of specific issues, 36% of investors cited conflicts of interest as their top concern with proxy advisors, 23% named lack of transparency & 20% identified errors in proxy advisor reports. Enabling robo-voting was named as the top concern by only 13% of investors – but 40% ranked it in their top 3.

Reminder: Your 10-Q Needs a Statement of Changes in Shareholders’ Equity!

Since a lot of companies are closing the books on Q1 of 2019, here’s a timely reminder from this  SEC Institute blog on a new requirement for your Form 10-Q:

As a quick reminder for first quarter-end, the SEC’s Disclosure Update and Simplification Rule last fall added a requirement to the Form 10-Q to include a statement of changes in stockholders’ equity. This requirement was added via this addition to Article 10-01(a) of Regulation S-X:

(7) Provide the information required by §210.3-04 for the current and comparative year-to-date periods, with subtotals for each interim period.

Article 3.04 referred to in the paragraph above is the requirement to provide a statement of changes in stockholders’ equity.

When the disclosure simplification changes went into effect last fall, the Staff issued Exchange Act Forms CDI 105.09 indicating that companies wouldn’t be required to provide this disclosure in their 10-Qs for the 3rd quarter, but that the disclosure would be required in subsequent 10-Q filings – and for  most companies, that means the upcoming Q1 filing.

Transcript: “Activist Profiles & Playbooks”

We have posted the transcript for the recent webcast: “Activist Profiles & Playbooks.”

John Jenkins