Nell Minow is the Vice Chair of ValueEdge Advisors. This post is based on her testimony in a hearing of the Subcommittee on Capital Markets of the House Committee on Financial Services.
I am very grateful for the opportunity to share my thoughts on proxy advisory firms. I welcome your questions and will submit supplemental materials as necessary following this session.
My connection to this field is that I was the fourth person hired at ISS when it began 40 years ago. I left as President of ISS in 1990 and remained on its board of directors until 1992. While I have stayed in the field of corporate governance ever since, always on behalf of shareholders, I have no connection to any company providing proxy advisory services, and am appearing today on my own behalf, and not representing or being paid by anyone.
I worked in the Justice Department’s Antitrust Division during the Reagan Administration, as a special assistant to now-Judge Douglas Ginsburg, long enough to know that the definition of “cartel” means either conspiring to fix prices or conspiring to keep out competition by imposing barriers to entry, or both. Neither is the case here. There are three major players in the field of proxy advisory services and they compete vigorously. Each has unique attributes that they emphasize in trying to sway clients, who I point out are not retail investors but the most sophisticated financial professionals in the world, the people at gigantic money management firms and public pension funds. ISS and Glass Lewis provide consulting services for the companies they cover; Egan-Jones does not, and they are happy to explain to you why they are free from this particular conflicts of interest. ISS is registered as an investment adviser and Egan-Jones is registered as a National Recognized Statistical Rating Organization (NRSRO), both with extensive requirements and regulatory restrictions.
