Proxy advisory companies such as Glass Lewis and ISS advise investors or vote on their behalf on any particular issue that’s put to a shareholder vote.
Requesting ‘Right-of-Center’ Options for Corporate Voting
Asset managers, who are often unable to analyze the hundreds or thousands of corporate issues that come up for shareholder votes each year across their portfolios, can choose among a number of “off-the-shelf” voting policies provided by proxy advisers. These include an ESG option, which could then signal to ISS and Glass Lewis to vote that fund’s shares in favor of, for example, reducing fossil fuels or implementing racial-equity policies among employees.But Robert Netzly, CEO of Inspire Investing, argues that these proxy agents don’t offer standardized options for conservative shareholders.
“So we’re asking them to change that and just give us and all investors that use their services some actual right-of-center options that don’t take a PhD in proxy voting to figure out how to use.”
The asset managers’ letter asks that the proxy advisers “provide off-the-shelf specialty proxy voting policies for investors who do not subscribe to central ESG provisions (who instead favor proposals ... against illegal discrimination against anyone; oppose restriction of services on ideological grounds; prefer to see market forces determine appropriate energy sources), and make it as accessible as the various ESG-aligned options.”
We Don’t Push an ESG Agenda, ISS Says
However, ISS stated that it offers “a wide array of house policies” and denied that its services and offerings are exclusively left-leaning. Responding to a request for comment, the company cited this June 13 statement from Gary Retelny, president and CEO: “Our proprietary benchmark policy, which often garners media attention, is developed with market input and takes a case-by-case approach to evaluating shareholder proposals, including those seen as ESG.“In 2022, a record year for environmental and social shareholder resolutions in the U.S., and for S&P500 constituents, ISS’ benchmark policy supported just 52 percent of all shareholder proposals characterized as ‘environmental’ or ‘social’ while supporting more than 96 percent of management resolutions. This is hardly the track record of an activist or advocacy organization pushing an ESG agenda.”
However, Jeremy Tedesco, senior vice president of the Alliance Defending Freedom, told The Epoch Times: “When publicly traded companies are called out for embracing ESG, they claim they are just listening to their shareholders, but because of the vast influence [proxy agents] exercise over how shares are voted, ISS and Glass Lewis’s biased voting standards result in a one-way conversation.
“These firms support a vast majority of left-of-center, pro-ESG shareholder proposals and effectively block proposals from conservative shareholders seeking to hold companies accountable for the anti-free speech and anti-religious behavior that ESG demands.”
Risks of Political Causes
In their letter, conservative fund managers asked the proxy agents to “begin the process of restoring trust” by supporting investors’ efforts to “ask companies about the risks of taking political stands on contentious social issues” such as “politicized debanking, decarbonization, or brand politicization as was recently the case with JPMorgan Chase, Target and Bud Light.”“You’ve alienated the left and you’ve alienated the right at the same time, so you’re left with a boycott from both sides. Our view is just stay out of these politically divisive issues.”
“I don’t think ISS and Glass Lewis really see themselves as activists,” Mr. Netzly said. “I think they believe their own rhetoric that they’re being passive ... but their version of centrist and unbiased is definitely not what most people would define as centrist and unbiased.”
He said he believes that there’s demand for conservative options for shareholder voting.
“If and when we get these options from ISS and Glass Lewis for conservatively oriented viewpoints that are just a menu item that you can select, I think they’re going to be overwhelmed, completely taken by surprise, by the flood of their client base using those voting guidelines,” Mr. Netzly said. “I think it’s going to be a landslide, and they’re totally clueless about how large of a landslide that’s going to be.”
Representatives for Glass Lewis were asked to comment for this article but didn’t respond.