Better not to vote than to vote in ignorance

18 November 2020

ISS voting recommendations are influential. Academic evidence suggests that’s probably not a good thing. Investors should revisit how they use them.

I’ve also done a shorter version of this blog, which might be more suitable for Remuneration Committee consumption

In the dock

Mention of ISS (Institutional Shareholder Services, the world’s dominant shareholder advisory firm) can cause company directors to come out in a rash. This powerful firm analyses company proxy statements and advises their clients, the shareholders, which way to vote on every resolution. Although not the only such firm, ISS has a dominant market position in the US, UK, and a number of other major markets. The influence the firm is perceived to have over proxy votes leads to them being treated by issuers as a major shareholder in their own right. Sometimes they make recommendations that companies disagree with, leading to accusations that they have power without responsibility, that they do not engage properly, and that they make errors in analysis with inadequate opportunity for timely resolution by issuers.

This influence has brought them into the cross-hairs of US regulators. Egged on by a powerful US corporate lobby, in July 2020 the SEC introduced new rules that would bring proxy advice within the proxy solicitation rules in the US. The rules impose new requirements on proxy advisers to: share recommendations with issuers; make clients aware of issuer rebuttals to ISS analysis; and disclose information about conflicts of interest. Although these requirements don’t sound like a big deal, adopting a default position that proxy advice falls under proxy solicitation rules certainly is. Fears that this new designation may result in further restrictions being imposed on proxy advisers in the future, ISS has issued a legal challenge against the SEC’s rule, which it is continuing to pursue, despite the final rule being watered down somewhat from that proposed in November 2019.

The Harvard Law School Forum has good summaries of the case for and against the changes. The purpose of this blog is not to discuss the merits of these arguments in detail. Instead I’m going to look at what the academic evidence has to say about the real influence of ISS. Although ISS is not the only proxy advisor, it is the most studied, through being the biggest and most prominent. Some of the research studies that we’ll look at also include Glass Lewis, another prominent global firm. But the studies I’ll discuss have nothing to say about the influence of smaller or specialist advisors such as Minerva Analytics, Federated Hermes EOS, IVIS, PIRC, and Egan-Jones. For this reason I will name ISS throughout this blog, rather than referring to proxy advisors in general.

The reason this topic matters is that firms like ISS provide a crucial service in the aid of stewardship. It’s nonsensical for every investor to gather and analyse the same information from proxy statements. There is a clear benefit that comes from having specialist advisors help investors reap economies of scale in data analysis. ISS is successful because it provides a service that its clients value. If ISS were as error prone and malign as some of its critics suggest then its tough to explain why the service is so popular with investors. Misguided regulation that puts sand in the wheels of this process will undermine the ability of shareholders to monitor companies effectively. But at the same time it’s important to understand which of issuers’ concerns are founded in reality and which can be written off as the grumpy complaints of directors not used to having people disagree with them.

What we’ll see is that the real problem lies not in the quality of the research but in the issuing and use of voting recommendations. And it’s a problem we need to get to grips with.

In this blog I’ll look at what academic research has to say about four questions (spoiler alert: summary conclusions in brackets):

• Does ISS influence the vote? (Yes)

• Which shareholders do they influence? (Investors who are the least likely to be informed themselves)

• Does ISS make good recommendations? (It seems not in terms of link to shareholder value)

• Does ISS impose a one-size-fits all approach? (Probably yes, although some mixed evidence)

I’ll then discuss what needs to happen next (Not more SEC regulation).

Does ISS influence the vote?

An ISS Against recommendation is typically associated with a 30% to 35% vote against the resolution. But is this correlation or causation? It could be that ISS just correctly anticipates the views of many investors much of the time - the relationship between voting outcomes and ISS recommendations is then simply a correlation. If this is the case, then the primary role ISS plays is as aggregators of information for clients to help inform their views - the voting recommendations are relatively unimportant. By contrast, a cause of disquiet amongst issuers is the suspicion that many investors follow the ISS recommendation in an unthinking manner and that the ISS recommendation has a causal influence. The difference matters. In the case of causation the ISS recommendation shifts the vote, and so the basis and quality of the recommendation become much more important.

Addressing this question of correlation versus causation is notoriously difficult as it is generally not possible randomly to assign negative ISS recommendations to a test group of companies. There is always the possibility that common factors (e.g. poor governance practices) are causing both the ISS recommendation and the negative shareholder vote. Malenko and Shen studied the causal impact of ISS voting recommendations using a so-called regression discontinuity approach. ISS used to have a screening method based on TSR performance that would cause them to adopt greater scrutiny of companies below certain performance thresholds. The authors found that companies below the threshold in 2010-11 saw a marked increase in Against recommendations from ISS and an increase in negative votes from shareholders. They compared a ‘control’ group of companies with TSR just above the threshold with a ‘treated’ group of companies with TSR just below the threshold. This latter group was subject to more ISS scrutiny and had a higher incidence of Against recommendations. Because being just above versus just below the TSR threshold is essentially random, the authors were able to treat this as a random trial, with the ‘treated’ group being randomly assigned more ISS scrutiny and Against recommendations. They were then able to infer that any differences in voting for companies just above and threshold can be attributed to the ISS recommendation. Using this approach they estimated an ISS Against recommendation for a remuneration proposal has a causal impact of 25% points on the vote.

This estimate is in the same ball-park as other findings. Ertimur, Ferri, and Oesch look at the relationship between say on pay voting patterns in 2011 and the nature of the investor base. Making the assumption that large block-holders (holding more than 5% of the firm) will generally do their own research and vote independently of ISS, they estimate a range for ISS’s influence on non-blockholder institutional investors at between around 10% and 34% points for an Against vote. In another paper, Iliev and Lowry looked at the voting practices of different types of investor across a range of resolutions over the 2006 to 2010 period and found that more than 25% of investors (NB not votes) tend to automatically follow ISS Against recommendations. When I was at PwC we examined whether these findings could be extended to the UK looking at say on pay votes over 2015-2017. We exploited a difference between the voting practices of the same institutions depending on whether or not they were a top ten investor to infer a 10%-15% causal impact (out of an average 33% level of opposition) when ISS make an Against recommendation on pay resolutions.

In social sciences it is hard to conduct perfect experiments to identify causality. However, looking at a range of studies the evidence strongly points to two conclusions:

• ISS recommendations do have a causal impact on shareholder voting outcomes

• The causal impact of an ISS Against recommendation is material, at 10% to 25% points, and is responsible for around half the average level of negative votes in such cases

So both sides have a point. The evidence seems strong that ISS recommendations shift the dial in a causal manner. On the other hand, companies need to be careful about complaining too much. Very low votes, below 75% to 80% in favour, will normally only occur if some large shareholders, who do their own research, also agree with ISS.

Which shareholders do they influence?

In the PwC study it was found that the majority of ISS’s voting impact came from the tail of a company’s register. When ISS recommended Against, 20% of firm’s top ten investors voted against (at the median) versus 35% for investors outside the top ten (on average the top ten shareholders account for around half the voted share capital in the UK). This reflects the intuition that a significant part of the impact of ISS comes from a less actively engaged tail of smaller shareholders. Moreover, investor behaviour differed depending on whether that investor’s holding was in a company’s top ten or outside: 2/3rds of investors were more likely to follow an ISS Against recommendation when they were outside the top then than within it, suggesting that size of holding is important as well as the size or nature of the asset manager. Ertimur, Ferri, and Oesch also find that the tendency to follow ISS recommendations is lower when firms have larger holdings, and so have greater incentives to do their own research.

Iliev and Lowry’s analysis looks at these issues in detail for the US market. They analyse the characteristics of investors that do and do not follow ISS recommendations. They identify a spectrum from active to passive voting, reflecting the extent of a fund’s reliance on ISS recommendations. Note this is not related to active and passive investment - indeed their main analysis is focussed on actively managed mutual funds. To avoid confusion I’ll use the terminology ‘engaged’ and ‘disengaged’ in place of ‘active’ and ‘passive’. The most engaged voters do not rely on ISS at all. Entirely disengaged voters follow ISS all of the time. They design a model that predicts the extent to which a fund will be engaged, which they find is strongly associated with actual voting behaviour. Their model suggests that funds will invest in their own research if the benefits of bespoke research outweigh the costs. They identify six factors that they expect to create a positive net benefit from voting:

• Fund family size - larger firms are likely to have more funds holding the same stock, allowing the costs of research to be spread over a larger asset value

• Fund size - larger funds are likely to have a larger holding of a given stock, again allowing the costs of research to be spread over a larger asset value

• % of fund net assets invested in the firm - the larger the fund’s holding the greater the future return benefit of active voting

• % of firm held by the fund - the larger the fund’s holding relative to the size of the firm, the greater the ability to influence the outcome of the vote

• Location - funds located in a city with lots of other fund managers are likely to benefit from networking-based exchanges of information that lower the cost of informed voting

• Fund turnover - funds with lower turnover can spread the costs of obtaining information over time, and information is likely to be relevant from one year to the next

They find that these factors do indeed strongly predict voting behaviour. They find that low net-benefit firms, which are expected to be less engaged voters, are indeed 3x as likely to follow ISS recommendations 99%+ of the time (36% of funds) as high net benefit firms who are expected to be more engaged (12% of funds). A similar result applies to the likelihood of following an Against recommendation from ISS. The least engaged investors follow the recommendation 73% of the time, over 3x the rate of 22% for the most engaged investors. Turning this around, the most engaged investors will ignore an ISS Against recommendation 78% of the time - given that these investors have the biggest stake in getting the vote right, this raises questions about the value of ISS recommendations.

The difference is even more marked when looking at compensation and governance proposals, where the most engaged investors vote in line with ISS Against recommendations only around 10% of the time or less, as against c. 70% for the most passive voters. Of course this could be an example of tin-eared investors ignoring the public mood on executive pay. Alternatively, it could be a case of hardened realists with skin in the game, who know what they’re doing.

Iliev and Lowry’s work suggests that the investors most inclined to follow ISS are those that have the least incentive to become informed voters themselves. This doesn’t mean that they are uninformed - the researchers can’t measure that directly. But it seems highly probable. The fact that uninformed investors are more likely to follow an advisor’s recommendation should come as no surprise - indeed that’s arguably part of the value of the advisor. More worrying is that the investors with most incentive to get it right show little inclination to follow those same ISS recommendations.

The available evidence suggests, in line with common sense, that ISS recommendations are most influential with firms that have the least incentive to invest in becoming informed themselves. These tends to be firms or funds that are smaller or have a smaller holding in the firm (both relative to the fund size and the firm size). In addition there is some evidence that higher turnover and location away from other asset manager firms may also be relevant factors.

So the ISS voting recommendations are influential. But are they any good?

Does ISS make good recommendations?

ISS research and advice plays two important roles in the market. By collecting and analysing information in a standardised form, ISS lowers the cost of voting research for investors by creating economies of scale. The fact that so many investors purchase ISS research suggests that this is indeed a useful and valued service. Many complaints about the accuracy of ISS reports were made to the SEC when they were reviewing their rules relating to proxy advisors. However, compelling evidence of systematic errors was thin on the ground. The second service that ISS provides is voting recommendations, where part of their pitch to investors is that they provide clear voting recommendations on all resolutions for a wide universe of companies in many countries around the world. The dirty secret of the industry is that this is attractive, in part, because in cases where the investor isn’t informed about the vote in question, they can still exercise their obligation to vote at the touch of a button: robo-voting. The quality of the recommendations is quite separate from the quality of the research. An informed, engaged investor may value the quality of the ISS research they use to inform their voting recommendation while caring not at all about the quality of the ISS voting recommendation itself.

However, we’ve seen that ISS recommendations do appear to have a causal impact on voting outcomes and the influence of their recommendations seems to be greatest on investors who are most likely to be uninformed. The quality of the recommendations therefore matters. If ISS make good quality recommendations then they perform a valuable service by improving the quality of voting decisions amongst uninformed investors. If they do not make good quality recommendations then they may be either adding nothing to, or even detracting from, the quality of voting across the market.

The evidence on the quality of ISS recommendations is mixed. Daines, Gow, and Larcker analysed overall governance quality scores provided by a range of providers including ISS based on data from 2005. They found limited evidence of subsequent predictive quality on accounting restatements, shareholder litigation, operating performance, share price performance, or cost of debt. This doesn’t mean that the research produced by such firms wasn’t useful to clients. Just that the aggregate ratings and scores were not. However, this research did not specifically address ISS voting recommendations.

I’ve already discussed the fact that Iliev and Lowry find that investors with the greatest incentive to be informed are far less likely to follow ISS Against recommendations. On the face of it this is troubling: investors with the biggest incentive to get it right ignore ISS Against recommendations most of the time. The authors undertake a further analysis of close votes. The market is unlikely to be able accurately to predict the outcome of close votes. Therefore, whether a vote is just failed or just passed is likely to be new information to the market, enabling observation of the effect on prices when the vote outcome is announced. When a vote that is supported by the most engaged investors just passes, there is a positive abnormal share price return. Conversely when such a vote just fails, there is a negative abnormal share price return. The authors find no correlation between the ISS recommendation and abnormal returns whether close votes are passed or failed. Taken together these findings suggest that voting behaviour of actively engaged owners is informative in relation to shareholder value whereas ISS recommendations are not. Indeed Iliev and Lowry’s findings are consistent with the idea that funds do earn a return on their investment in active voting. Finally, disagreements between ISS and other investors matter - the study finds that those funds that disagree with ISS are more likely to sell their shares in the next quarter, presumably because they believe it is less likely that they will get the governance policies they want.

Ertimur, Ferri, and Oesch address the informativeness of ISS recommendations in two ways. First they look at share price returns around the announcement of ISS recommendations. They find a small (<1%), but statistically significant, negative abnormal share price return on announcement of an ISS Against vote. The negative return is higher for companies with no history of say on pay dissent (indicating that the recommendation was less expected). On the face of it, this may indicate that the ISS recommendation is giving significant information about the quality of the compensation plan. However, it could also be that, in line with Iliev and Lowry, engaged investors may be concerned that the ISS recommendation negatively affects the voting behaviour of uninformed investors leading to pressure on the company to make suboptimal changes to compensation.

They explore the issue further by examining situations where a company responds to a negative ISS recommendation on a compensation plan by making changes for the next year’s AGM. Analysing ISS Against recommendations on 2011 say on pay votes, they found that 55% of these companies made changes in 2012 to address ISS concern. The likelihood of making a change was apparently discontinuous depending on the level of opposition to the 2011 vote. When the 2011 vote against was above 30%, then 32% of firms subsequently made changes. This rose to 72% of firms when the vote was above 30%. This discontinuity itself was evidence for the influence of ISS. Following the 2011 proxy season they had said that firms failing to respond to a ‘significant’ vote against of 30% or more would incur recommendations against the say on pay vote and re-election of compensation committee members. However, the authors found no positive share price reaction to the announcement of changes to compensation that were introduced in 2012 to address ISS’s concerns. This was the case even when looking at a subset of cases where the changes led to a reversal of the ISS recommendation to For and a substantial increase in the vote. This suggests that investors did not see in value in firms changing compensation designs to satisfy ISS, and indeed the earlier share price fall on announcement of the Against recommendation may have been due to fear of suboptimal changes to appease the proxy advisor.

Larcker, McCall, and Ormazabal analyse the 2011 AGM season, looking at announced changes in firms’ compensation practices in the eight months prior to the proxy statement release date. They categorise these announcements according to whether those changes are favoured by proxy advisors or not and then look at the abnormal share price returns around the date of the announcement. They find that changes introduced to align with proxy advisor preferences lead to negative abnormal returns whereas other announced changes lead to neither positive nor negative abnormal returns. They find that this is consistent with the conclusion that compensation changes desired by proxy advisors such as ISS come at a net cost to shareholders, whereas other changes are on average value neutral. They also found that the negative impact of proxy-advisor-aligned compensation changes were largest in firms that exhibited the greatest difference from industry norms across a number of characteristics. The authors’ interpretation is that the costs of following proxy advisor recommendations are greatest in firms where the optimal contract is less likely to conform to a standard model.

A recent unpublished paper by Alberquerque, Carter, and Gallani is more encouraging for ISS. It is important to highlight the caveat that this paper has not been accepted for publication and so has not completed the peer review process. It may be that flaws are identified through that process that undermine the results. But subject to that caveat, the results are interesting. The authors conjecture that if ISS recommendations are informative, then an Against recommendation on say on pay should give information about the poor quality of the firm’s compensation plan. This should then in turn lead to weaker subsequent performance, on the assumption that compensation affects executive incentives. They test their hypotheses in the US market using data from 2010-2017. The authors’ chosen measure of future performance is industry-adjusted Return on Assets. Their regressions find a statistically significant association between an ISS Against recommendation and subsequent underperformance. This does suggest that the ISS Against recommendation may have predicative value. However, further analysis shows that this relationship only holds for non-December year ends. For December year ends, which comprise 75% of the total, the ISS recommendation has no predictive power. The authors attribute this to a workload compression issue. In the busy season, more analysis is outsourced to temporary, potentially less expert, resource and the availability of experienced senior managers, who overlay judgement, is constrained.

ISS research may be excellent. However, the evidence suggests that their voting recommendations are of limited use in promoting shareholder value. The picture is distinctly mixed with most studies showing that ISS voting recommendations do not provide shareholders with useful information. Even in the most favourable study, the recommendations are only found to provide useful information outside of the busy season, and so not for the vast majority of companies.

Does ISS impose a one-size-fits-all approach?

There is some evidence that one-size-fits all approaches to governance can be suboptimal, whether on specific issues such as board structures or more broadly through regulations standardising governance approaches across a range of factors. Is there a risk that ISS also imposes costs through encouraging firms to adopt governance approaches that do not take specific account of individual circumstances?

We can turn again to the study by Iliev and Lowry for insight. They analyse 11 agenda items proposed by shareholders at 25 or more company meetings. These are proposals such as splitting Chair and CEO positions, declassifying boards, amending articles and calling special meetings. As such they may be considered ‘standard items’. For eight of these items ISS recommended voting with management on fewer than 10% of occasions, and for two more on fewer than 20% of occasions. Only on separation of Chair and CEO positions did ISS show significant diversity of approach, recommending a vote with management on one-third of occasions. This suggests, across many of these issues, application of what is tantamount to a one-size-fits-all approach. This does not matter if ISS is simply reflecting the settled consensus of informed investors. However, the most engaged active voters identified by Iliev and Lowry show much greater diversity of approach. These engaged investors supported management over half the time on six out of the 11 issues. Only in two cases - declassification of boards and reducing supermajority vote requirements - did these investors support management less than 20% of the time. This suggests that ISS may adopt one-size-fits all policies that do not reflect the approach of more engaged investors.

Counter-evidence is found in Ertimur, Ferri, and Oesch. This paper focusses on say-on-pay evaluations and finds that a range of potentially controversial pay practices can lead to differing levels of censure from ISS, suggesting that they take company context into account. In most cases these authors found that presence of a specific negative compensation feature would not automatically lead to a negative recommendation with ISS taking into account the overall context and quality of the compensation plan (UK readers who have tried to adopt restricted stock with a discount of less than 50% or alter pro-rating provisions on LTIPs might beg to differ). This finding might reflect the non-binary nature of many of the compensation features identified by these authors.

A recent unpublished paper by Felipe Cabazon identified an increased convergence in CEO pay in the US, with 25% of the divergence in pay structures disappearing over the ten years to 2016. The author’s measure of pay structure is very focussed on pay mix rather than the design of individual elements. The study finds that convergence is more rapid in firms that have had annual as opposed to triennial say on pay votes, in firms that have high ownership of index funds, and in firms that have received a negative ISS recommendation on compensation. It also finds that firms are gradually converging towards a pattern of pay reflecting ISS recommendations. This paper must be subject to the same caveat that applies to the other unpublished paper referenced above: it has not been subject to peer review and so its results must be viewed with caution at this stage. However, while it does not establish causality, it does add further weight to the view that proxy advisor evaluation frameworks may lead to one-size-fits-all approaches, which certainly accords with the experience of many practitioners.

Is voting all it’s cracked up to be?

The academic evidence on ISS isn’t all one way. But it does suggest that:

• ISS has a causal impact on voting outcomes, probably amounting to 10% to 25% points for an Against recommendation

• This impact primarily comes through ISS’s influence on investors who have less incentive to do their own research and who are presumably less informed

• ISS recommendations differ markedly from those of the most engaged investors and their Against recommendations aren’t that good at identifying bad compensation practices, as measured by impact on shareholder value - indeed amending compensation to meet ISS concerns may be harmful to shareholder value

• ISS recommendations contribute to an increasingly one-size-fits all environment for governance and compensation

So ISS voting recommendations have impact, are most influential with less informed investors, are of questionable value, and contribute to one-size-fits-all governance. This all adds up to a real problem with voting recommendations and the way they are used by investors.

If this sounds like a hatchet job on ISS, that’s really not what’s intended. My own experience as a practitioner was that ISS produces excellent, and generally accurate, research in almost impossibly short timeframes. It isn’t surprising that many investors subscribe for this service to obtain economies of scale and prevent duplication of standard data gathering in a compressed AGM season. The problem comes with the voting recommendations and how they are used. We should not expect a relatively low cost analysis service provided by a proxy advisor to be staffed to the hilt with experienced senior managers capable of making nuanced judgements on the shareholder value implications of complex strategic issues across thousands of companies. Recommendations will inevitably be somewhat standardised and the analysts are not equipped to take into account all of the shareholder value impacts. Indeed it’s absurd to expect otherwise - it would be astonishing if they could make such judgements (and they probably wouldn’t work for ISS if they could). The problem, then, is with the investors that use the service. ISS cannot be blamed for providing recommendations: if the market demands dumbed down advice, then the market will surely supply.

So what of the investors? Informed and engaged investors don’t use the ISS recommendations (or if they do it’s no more than an initial sighter or screening tool). Their interest is in the information and analysis that ISS produces in a conveniently consistent, detailed, and analytically insightful form. These investors then cast the vote in line with their own judgment. The problem is investors who are less engaged. In many territories it is morally (or legally) compulsory for investors to vote on everything, even when they don’t have the expertise or incentives to consider the issue. It is inevitable that we will have, on any given issue, a group of investors without the expertise, resources, or motivation to cast an informed vote. The natural place for them to go is a voting recommendation service.

How do we get out of this bind?

ISS themselves could make more use of non-committal recommendations such as ‘for strategic judgement’ to push complex decisions back onto investors where they properly belong. This would particularly apply to complex strategic judgements such as transactions and compensation. But even black-and-white issues (such as separation of Chair and CEO) may not always have black-and-white answers. And a globally consistent recommendation service is at the heart of their business model - it is hard to see them giving it up voluntarily. There are frequent calls from companies for proxy advisors to engage more so that they better understand company perspectives. But this may be misguided. The research shows that ISS does not behave like an engaged shareholder - they should not and cannot, they will never have the capability. More engagement might create the opportunity for firms to try to browbeat ISS analysts to their way of thinking, but it’s unlikely to lead to better voting recommendations.

Investors certainly need to take responsibility for guiding the proxy advisory industry into calmer waters. They pay the piper and so set the tune. Investors need to recognise the damage caused by uninformed robo-voting and the dangers of following voting recommendations provided by advisors who can really have little hope of being equipped to make the necessary judgements. They need to stop pretending that unthinkingly following a voting recommendation is any better than not voting at all. They need to be more assertive about where voting fits into good stewardship, and where it does not. They need to encourage more competition by supporting a greater diversity of players to reduce the sense that a single firm is driving the whole market. This will require a focus on quality and diversity as well as cost, and less focus on voting recommendations. The problem of reliance on voting recommendations is likely to get worse with the proliferation of ESG-related resolutions and advisory agencies. It’s one that investors have to get to grips with.

But perhaps the biggest problem of all is in attitudes to voting. Voting in all circumstances has come to be seen as a moral, or in some places a legal, obligation and the sign of a good steward. But good stewardship comes in many shapes and sizes and need not always involve voting. Mandating voting (whether legally or in practice) inevitably creates circumstances where the cost of becoming an informed voter outweighs the benefits to the investor. Voting recommendations fill the gap. But as we’ve seen it may be better for such investors not to vote at all. Perhaps the emphasis in stewardship codes could shift from voting to informed voting, with investors explaining the circumstances under which they are equipped to cast their vote responsibly and with knowledge, and only voting in those cases. The evidence presented here suggests that no vote may be better than a vote cast in an unthinking manner in line with an ISS voting recommendation. Further nudges could be given by discouraging robo-voting, the automatic population of proxy voting records using ISS recommendations without any intervening input from the asset manager. Disclosure requirements could shine a light on the prevalence of this practice. But as long as voting is deemed to be compulsory, the market for voting recommendations will remain.

The courts will decide whether the SEC has over-reached with its new rules. It certainly looks like a sledgehammer to crack a nut with some potentially significant negative consequences that could be harmful longer term to investors’ ability to monitor companies. So I hope that ISS’s lawsuit succeeds. Investors should be accountable for deciding how to discharge their voting rights. If there’s a perceived problem with how they are doing that, then it seems preferable to take the issue up with the principal rather than with a mere service provider.

But perhaps the main problem is the perception that voting is always a good thing. Informed voting, yes. But it’s better not to vote than to vote in ignorance.

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