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In another example of his muscular and unconventional presidency, President Trump’s White House has discussed ways to cut off at the knees the influence of ISS and Glass Lewis, hated by the likes of Elon Musk and Jamie Dimon (and everyone else) and the “big three” asset managers.
The WSJ reported that the White House is discussing ways to defang the big three, State Street, Blackrock and Vanguard, by imposing so-called “mirror voting,” which would require their shares to be voted in proportion to how other shareholders vote—the ultimate move in passive investing.
In addition, according to a separate Wall Street Journal report, the FTC has launched an antitrust investigation into the two proxy advisors to probe whether their recommendations on shareholder proposals constitute “unfair methods of competition.”
There is no shortage of critics of the proxy-advisor duopoly, and the Squawk Box team had an interesting discussion on the topic Wednesday morning with Chevron CEO Mike Wirth. Wirth shared he believes that the proxy advisory system is “broken” and “ripe for reform.”
That sentiment was echoed by the (soon-to-be nonagenarian) activist Carl Icahn, who told The Journal’s Cara Lombardo that with the help of ChatGPT he is preparing a white paper focused on curbing index-fund voting power, which he argues has made it “impossible for activists to win proxy fights.” Icahn plans to urge Congress or President Trump to act on the matter. Ann Lipton, University of Colorado Law Professor, told DealBook that increased regulatory pressure makes it more likely proxy advisors will now “recommend with management.”
Gordon Haskett noted that any White House executive orders along these lines could give activists “the gift they have pined for.” If imposed, they wrote, such measures would make activist campaigns a lot more viable by neutralizing the roughly 25% voting block controlled by passive funds.
Starting in 2027, Glass Lewis said it would halt the “house” view on a particular proxy vote and instead tailor its recommendations to client needs.
In his Squawk Box appearance, Chevron’s Wirth struck a more measured tone, praising asset managers for so-called pass-through voting “creating vehicles that allow people to vote their own shares,” while acknowledging that “this is a discussion that still needs to unfold.”
(Here’s a link to our recent piece on pass-through voting.)
Looking ahead, we’re excited about Columbia Law School’s Millstein Conference on M&A and Corporate Governance taking place Friday November 21st at the school’s leafy Morningside Heights campus. Registration is required.
Have a great weekend,
GPP Team
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