Gunster’s Bob Lamm – who is no fan of proxy advisors – has some words of caution for those inclined to rejoice over President Trump’s recent executive order targeting them.  Here’s an excerpt from his comments:

Executive orders are not models of subtlety or nuance, and given the complexities of the proxy process (more on that below), they are likely to have any number of unintended consequences. (Can you say “ready- fire-aim”?)

One such consequence may be the demise of the proxy advisory business. Some may view that as a good thing, but one reason that the proxy advisory business continues to exist is that there is a market for it; many investors need it. Simply stated, investors do not have the time to review proxy statements at all, much less review them carefully. (For example, I once asked one of my company’s major investors how much time it spent reviewing our proxy statement. The response was more or less as follows: “You are one of our major investments, so we devote more time to you than most companies – around 15 minutes.”)

With the number of investments they have to monitor, Bob says it’s not surprising to see many institutions rely on third parties for advice. He suggests that if the proxy advisory industry is squashed, some institutions won’t vote at all, which could make it even harder for companies to obtain quorums. Even worse, these institutions may reflexively vote “no” or increase their use of robo-voting.

– John Jenkins