Article by Caleb N. Griffin
Pass-through voting promises to democratize corporate governance, wresting away a portion of the vast, concentrated power in the hands of a few asset managers and returning it to beneficial owners. Whether, and how, to implement this strategy has been the subject of much debate. Recently, the world's largest asset managers have voluntarily implemented programs for “voting choice,” agreeing to pass through a measure of voting authority to selected investors. This Article provides an in-depth analysis of these innovations in voting policy and the incentives motivating their adoption.
Unfortunately, the present instantiation of voting choice fails to solve many of the issues it purports to address. Charitably, it is a positive first step toward democratizing corporate governance. Less charitably, it is a cynical attempt to dissuade a more robust regulatory response, a strategy for minimizing political and reputational risk, and a marketing ploy to differentiate commoditized products. By granting investors a carefully constrained choice, asset managers may effectively evade accountability for voting on the growing number of politically risky issues on corporate ballots while avoiding meaningful change.
Rather than adopting a performative and constrained version of voting choice, asset managers should instead adopt an “open proxy” policy that allows investors to delegate voting authority to a proxy advisor of their own choosing. Such a policy would enhance democratic legitimacy, induce greater competition in the stagnant and duopolistic proxy advisory industry, and more substantively address the unprecedented concentration of power in the hands of unaccountable financial intermediaries.
About the Author
Caleb N. Griffin, Associate Professor of Law, University of North Carolina School of Law.
Citation
99 Tul. L. Rev. 247