Bias in proxy voting? Solved with pass-through voting?
– Latest “As You Sow” report shows that large asset managers tend to vote with management of their customers at a higher rate than non-customers.
– Some note that the concentration of voting power among a few asset managers should be broken up by allowing pass-through voting from retail holders.
Here’s a note from Andreas Posavac:
Bias in proxy voting? something that our IHS Markit ESG and governance advisory team is monitoring for hundreds of corporate clients, especially through the current AGM season. Interesting report and perspective from As You Sow, looking at potential conflict of interest between the largest asset managers and their financial clients.
The research compares proxy voting records from January 2015 to June 2020 to commercial relationships, which uncovers the fact that all major fund managers considered — BlackRock, State Street, Vanguard and T. Rowe Price — vote with management of their customers at a significantly higher rate compared to non-customers. Proxy voting biases favoring clients occurred at all four asset managers on management resolutions and occurred at three of the four asset managers; ESG resolutions; and climate-related resolutions.
In this NY Times article, Jeff Sommer argues for pass-through voting. Here is an excerpt:
An independent S&P 500 index fund based in Honolulu, called INDEX, has taken a small step that could have revolutionary implications: This year, it has begun asking shareholders how they want to vote.
The fund has introduced what it calls “Index Proxy Polling,” an easy way for shareholders to convey their preferences on proxy votes for S&P 500 companies. The aim is to demonstrate how shareholders in an index fund could express their opinions.
So far, only about 100 investors have participated, said Mike Willis, the fund manager, and current S.E.C. regulations require him to make the final voting decisions on behalf of the fund. But he said he hoped the S.E.C. would eventually allow him “to move to real shareholder democracy and go to pass-through voting, in which the shareholders say what they want and we just cast the vote for them.”
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