Concerns About the Quality and Influence of Proxy Advisors, and Its Implications for the Preparations of the Shareholders Meeting

After highlighting the importance of the votes cast by institutional investors in shareholders meetings of listed companies, and the role proxy advisors play in this respect, this article turns to the points of criticism that are strongly emphasized in American literature, as well as to the state of regulation on both sides of the Atlantic, also including the stern action the SEC has been taken recently with respect to proxy advisors. On the basis of a questionnaire issued to Dutch listed companies, I shed light on the perception of listed companies of the actions of proxy advisory services. I will conclude with a few reflective remarks, also about the consequences of the growing role of proxy advisors for the preparation of the shareholders meeting dynamics surrounding the shareholders meeting.

Majority of the Minority Approval of Related Party Transactions: the Analysis of Institutional Shareholder Voting

Majority of the minority (MOM) approval of related party transactions (RPTs) has become a popular mechanism to be used in the oversight of RPTs among academics, stakeholders and regulators. Using this mechanism means that for companies, entering into RPTs are subject to the approval of a certain majority of the disinterested shareholders. This article examines the effectiveness of MOM approval as a mechanism to oversee RPTs, i. e. whether it would prevent value-decreasing RPTs while allowing value-increasing ones, by analysing institutional shareholder voting in this context within the US and European legal framework. Specifically, it examines whether institutional shareholders who dominate the shareholding across the world have sufficient incentives to cast informed votes in MOM votes on RPTs and the role of proxy advisors in this regard. Taking account of the relevant theoretical claims and empirical evidence, it provides further policy recommendations to improve the efficacy of MOM approval.

Disciplinary power in corporate governance: A Foucauldian analysis of the emergence and development of proxy advisors

Prior research in corporate governance has extensively investigated the mechanisms through which a variety of actors (financial analysts, investment managers, shareholder activists) monitor and discipline corporate executives. However, one recently emerged actor has received little attention so far: the proxy advisory firm. Mobilising Foucault’s concept of disciplinary power, this study uses historical analysis to examine the role of proxy advisors in corporate governance. This article shows that proxy advisors actively contributed to developing and implementing disciplinary mechanisms. This involves (1) hierarchical observations of corporations and their executives on a global scale. These observations are made available to institutional investors on proxy advisors’ voting platforms which have Panopticon-like features; (2) normalisation of judgements through the provision of generic voting policies, generic voting recommendations and corporate governance ratings prepared by proxy advisors and delivered to many institutional investors; (3) ritualised examination of the performance of corporations and of their executives during the annual general meeting, including record-keeping of all past voting results.

Determinants of commitment and opportunism of institutional investors’ behaviour: an empirical investigation on Robo-voting Phenomenon

Purpose of the paper: Recent research identifies a troubling number of institutional investors that automatically follow the advice of their proxy advisors so that they can prove to have complied with their fiduciary duties in a practice known as robo-voting. Therefore, our central research questions are: How could the characteristics of institutional investors affect robo-voting phenomenon? How could robo-voting phenomenon favour the creation of new opportunistic behaviour, changing the scope of shareholder engagement? Methodology: Our paper directly addresses these questions by using ANCOVA (Analysis of Covariance) to test the effect of characteristics of institutional investors on the dependent variable under study. We use a manually constructed sample of coverage information from 123 Annual General Meetings held by large Italian companies in the 4-year period 2015 to 2018 and the voting reports of three proxy advisors. Findings: We show that such voting based on robo-voting phenomenon is restricted to specific types of institutional investors and it may be highlighted as a negative aspect of a duty to ‘demonstrate’ engagement on the part of institutional investors. Specifically, this duty could depend on location, strategy and category of institutional investors. Research limits: We refer only to the Italian market and it may be considered as a peripheral market by investors. Practical implications: We argue that legal enforcement of the conceptual and operational spectrum of engagement duties currently sits uncomfortably upon institutional investors and proxy advisors. Originality of the paper: We think it is important to consider how to promote shareholder engagement in general in a European context and at the same time curb negative activism by some shareholders.

Interessenkonflikte bei kollektiven Vermögensverwaltern und Stimmrechtsberatern

Based on the new disclosure requirements for institutional investors, asset managers and proxy advisors introduced in the course of the implementation of Directive (EU) 2017/828, the study deals with the participation-related conflicts of interest of collective asset managers and proxy advisors, their treatment under European and national law to date, and the regulatory system of the Shareholder Rights Directive. On this basis, the question is examined to what extent the area under research requires further regulation. The focus is on the systemisation of the previous as well as the new conflict-related regulatory concept and, following on from this, the channelling of future legislative revisions.