Brian Tayan is a Researcher with the Corporate Governance Research Initiative at Stanford Graduate School of Business. This post is based on a recent paper by Mr. Tayan; David Larcker, Director of the Corporate Governance Research Initiative at the Stanford Graduate School of Business and senior faculty member at the Rock Center for Corporate Governance at Stanford University; Stephen Miles, Founder and Chief Executive Officer of the The Miles Group, LLC; and Kim Wright-Violich, Managing Partner at Tideline.
We recently published a paper on SSRN, The Double-Edged Sword of CEO Activism, that examines CEO activism among publicly traded companies.
CEO activism—the practice of CEOs taking public positions on environmental, social, and political issues not directly related to their business—has become a hotly debated topic in corporate governance. According to the New York Times, “Chief executives across the business world are increasingly wading into political issues that were once considered off limit.” The article cites gun control and climate change as examples of advocacy positions taken by CEOs in recent years, and references a study by Edelman as evidence that this trend is viewed positively by the public. According to that study, 64 percent of global consumers believe that CEOs “should take the lead on change rather than waiting for government to impose it,” and 56 percent say they have “no respect for CEOs that remain silent on important issues.” A separate survey by Weber Shandwick and KRC Research arrives at a similar conclusion, finding that “more Americans are aware of CEO activism, view it favorably, and see its potential to influence public policy.”
Comment Letter: Fiduciary Duty Guidance for Proxy Voting Reform
More from: Cynthia Williams, Keith Johnson, Susan Gary
Keith Johnson heads the Institutional Investor Services Group at Reinhart Boerner Van Deuren s.c.; Susan N. Gary is an Orlando J. and Marian H. Hollis Professor of Law at the University of Oregon; and Cynthia Williams holds the Osler Chair in Business Law at Osgoode Hall Law School, York University. This post is based on their Comment Letter in advance of the SEC’s Proxy Process Roundtable.
Investor proxy voting practices have entered the public spotlight in 2018 as Congress and the Securities and Exchange Commission (“SEC”) consider changes to the rules which govern proxy voting. However, an accurate recognition of the investor fiduciary duties which provide the legal context for exercise of proxy voting rights has been largely missing from the debate.
We believe that any reform discussions should be anchored on an up-to-date understanding of how fiduciary principles fit the 21st century. This includes a balanced application of the fiduciary duties of (a) prudence (including the obligation to investigate and verify material facts), (b) loyalty to beneficiaries (with its obligation to treat different beneficiary groups impartially), and (c) reasonable management of costs. These are legal duties which establish expectations for proxy voting processes at asset owners, investment managers and proxy advisors.
READ MORE »