Protecting Americans' Retirement Savings from Politics Act
For full text of the bill, click here.
Proxy advisors are fueling a movement to weaponize your retirement funds to push their political agendas. This hurts workers, our economy, and your retirement security. The Protecting Americans’ Retirement Savings from Politics Act reins in proxy advisors, keeps politics out of the boardroom, and ensures retirement savers’ economic interests are prioritized.
Millions of American families rely on asset managers, investment advisors, and pension funds to save for retirement. As a result, these entities have an outsized role in determining the direction of U.S. corporations through the shareholder voting process. In order to navigate the hundreds, if not thousands, of shareholder proposals each year institutional investors have come to rely on proxy advisory firms. The market for proxy advice is dominated by two firms that carry immense sway in determining the outcome of shareholder votes. Their dominance further concentrates power over American corporate governance.
Shareholders of public companies vote each year on important issues such as board appointments and a wide variety of shareholder proposals. Average retirement investors often do not vote in these elections. Instead, the institutions that manage funds on their behalf cast most shareholder votes. Many retirement investors are not aware that their shares are being voted on their behalf, often at the direction of two entities. This separation of ownership and voting has allowed activists to use the investments of hard-working Americans to further political agendas.
Roughly 70 percent of the outstanding shares in publicly traded U.S. companies are held by institutional investors such as mutual funds and pension funds. American families depend on these institutional investors to manage their retirement savings, including voting their shares. However, to save costs, many institutional investors rely on proxy advisory firms for recommendations on how to vote the shares under their control.
The market for proxy advice is dominated by two firms, Glass Lewis and Institutional Shareholder Services (ISS), which jointly have 97 percent market share. ISS is a German-owned company and Glass Lewis is owned by Peloton Capital, a private equity fund. Far too often, these two proxy advisory firms successfully pressure institutional investors to vote contrary to shareholder economic interests and in support of political initiatives focused largely on climate goals and sustainability.
These firms make more money if there are more shareholder proposals and, as a result, they are incentivized to encourage, including by voting for, activist proposals. At the same time, they also offer companies consulting services to address the same activist proposals they encourage. Making this even worse, the proxy advisory firms do not bear any costs and have no accountability for misguided recommendations. Retirees bear the costs of shareholder proposals and bad recommendations. Recently, with the encouragement of progressive SEC leadership, proposals have strayed into highly political areas that are beyond the expertise or authority of fund managers.
The degree of concentration in the proxy advisory firm industry coupled with the level of power wielded by the proxy advisor duopoly and their significant conflicts of interest warrants additional investor protections and Congressional oversight. Sunlight is the best disinfectant, and competition can produce better outcomes for American retirement investors.
READ: ASA Letter of Support - Christopher A. Iacovella, President and CEO, American Securities Association
READ: U.S. Chamber of Commerce Letter of Support - Tom Quaadman, Senior Vice President, Economic Policy, U.S. Chamber of Commerce
READ: Milken Institute Letter of Support - Michael S. Piwowar, Executive Vice President, Finance, Milken Institute
READ: NAM Letter of Support - Chris Netram, Managing Vice President, Policy, National Association of Manufacturers
READ: WSJ - The Proxy Protection Racket - Former SEC Commissioner, Jay Clayton
READ: WSJ - A Historic Breach of Fiduciary Duty - Oklahoma State Treasurer, Todd Russ and Utah State Treasurer, Marlo Oaks
READ: WSJ - The Proxy Advisory Duopoly Gets New Scrutiny - Editorial Board
READ: WSJ - The ESG Proxy Vote Ranking - Editorial Board
READ: WSJ - Cracking the Proxy Advisor Duopoly - Editorial Board
READ: WSJ - Proxy Advisers and Double Standards - Editorial Board
For full text of the bill, click here.