Via a reader, this is a very interesting document (.pdf) from the US Chamber of Commerce containing one of their member’s testimony to a Senate Committee. This excerpt near the beginning gives a flavour of what they’re protesting:
Public companies and their shareholders are increasingly targeted through the proxy system and other means over issues that are unrelated to – and sometimes, even at odds with – enhancing long-term performance. Topics that should be reserved for the legislative and executive branches of government – including a variety of social and political issues that may not be directly correlated to the success of the company – are increasingly finding their way into proxy statements and being debated in boardrooms. This has created significant costs for shareholders and in many instances has distracted boards and management from focusing on the best interests of the company.
In short, activist shareholders are demanding companies adopt SJW-driven policies which have a detrimental effect on financial performance. So who’s responsible?
As the Manhattan Institute has pointed out, labor-affiliated pension plans have historically been the most active at advancing such agendas that do not correlate with long term performance. From 2006-2015, labor-affiliated investors sponsored 32% of all shareholder proposals at the Fortune 250, many of which deal topics of a social or political nature. Both the Department of Labor (DOL) Inspector General and the United States Court of Appeals for the D.C. Circuit have expressed skepticism as to whether the shareholder activism engaged in by labor-affiliated funds is actually connected to increasing share value.
No doubt those in charge of managing the pension funds have guaranteed incomes and rock-solid personal finances so are happy to risk their members’ retirement incomes to pursue their own political goals. There is some good news, though:
The DOL took action this year in order to ensure that Employee Retirement Income Security Act (ERISA) fiduciaries are making investments based on economic factors and not elevating environmental, social, or governance (ESG) impacts over returns.
I wonder how many pension funds divested from oil stock, which traditionally pays consistent dividends, at the behest of SJWs?
A 2015 Manhattan Institute Report found that the social activism engaged in by certain public pension plan systems – such as the California Public Employee Retirement System (CalPERS) and the New York State Common Retirement System (NYSCR) – is actually correlated with lower returns for the plans. In other words, public pension plan beneficiaries and taxpayers in such jurisdictions are actually harmed when the overseers of public pension plans emphasize social or political goals over the economic return of the plan.
Outdated SEC proxy rules have allowed motivated special interests to take advantage of this system to the detriment of Main Street investors and pensioners. The problems we face today have in part stemmed from a lack of proper oversight over proxy advisory firms and a failure to modernize corporate disclosure requirements. Activists have been able to hijack shareholder meetings with proposals concerning pet issues – all to the detriment of the vast majority of America’s investors.
So the problem isn’t just that activists wreck the returns for their own members, they wreck those of anyone else investing in the company as well. I suppose the moral of the story is, when choosing a company to invest in, to look at whether their stockholders include public pension plans – particularly those from the New York or Californian public sectors.
This also chimes slightly with what I’ve been said before:
The deficiencies within the U.S. proxy system must also be viewed against the backdrop of the sharp decline of public companies over the past two decades. The United States is now home to roughly half the number of public companies than existed in the mid-1990s and the overall number of public listings is little changed from 1983. While the JOBS Act helped arrest that decline, too many companies are deciding that going or staying public is not in their long-term best interest.
So stay small, stay private, and avoid both regulations and the lunatics. It also won’t surprise many to learn that government regulations have created a cosy little duopoly, either:
Activist campaigns, as well as routine proxy matters that companies deal with today, are also magnified by the outsized influence of proxy advisory firms. Two firms – Institutional Shareholder Services (“ISS”) and Glass Lewis – constitute roughly 97% of the proxy advisory firm market, yet both are riddled with conflicts of interest, operate with little transparency, and are prone to making significant errors in vote recommendations that jeopardize the ability of investors to make informed decisions in their best interests.
What was I saying earlier about “guaranteed incomes and rock-solid personal finances”? The authors believe the answer is greater regulation for proxy advisory firms, but I don’t know if that won’t just deliver another set of unintended consequences further down the line. My preferred solution is more people stand up to idiotic lefties and SJWs wherever they are to found, using mockery, humiliation, and a refusal to play their game. Alas that will require courage, a trait largely absent in today’s business world.