Big Investors Withhold Votes from Directors in Record Numbers

August 1, 2017

Wall Street investors are showing more displeasure with corporate directors, notes a recent Bloomberg article. Citing data from ISS Corporate Solutions, a consulting firm affiliated with Institutional Shareholder Services, the article observes that “shareholders have withheld 20 percent or more of their votes for 102 directors at S&P 500 companies so far this year, the most in seven years.” According to Peter Kimball, Head of Advisory and Client Services at the consulting firm, “voting against directors at large-cap S&P 500 companies is a way for an institution to send a signal to other, smaller companies about the actions that they don’t like. That feedback trickles down.”

The Bloomberg article sees a broader trend: “While the Trump administration moves to reduce regulatory pressure on companies, big institutional investors are moving in the opposite direction. State Street Global Advisers and BlackRock Inc., for example, are increasingly taking an activist approach, calling for changes in diversity and corporate responsibility.” According to Rakhi Kumar, Head of Environmental, Social and Governance Investment Strategy at State Street, “board responsiveness is a key reason why shareholders will hold directors responsible. If engagement isn’t working and boards aren’t being responsive to our feedback, then we take action.”

2017 has indeed been a particularly turbulent proxy season, with no shortage of “action” by major investors like State Street and BlackRock, as discussed in previous Ticker reports on Dutch pharmaceutical company Mylan, ExxonMobil, Occidental Petroleum, Wells Fargo and Volkswagen.

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