Who is Overseeing the Proxy Advisors?

December 2008
Colin J. Diamond, Irina Yevmenenko

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Proxy advisors are perceived as wielding significant power over shareholder meetings. In 2002, Institutional Shareholder Services' (ISS) endorsement of the Hewlett-Packard/Compaq merger was widely viewed as a decisive factor in the 51.4% vote in favor of the merger. Companies whose proposals are supported by proxy advisors often issue press releases trumpeting this fact. Conversely, those whose proposals are challenged by proxy advisors often issue detailed explanations as to why the proxy advisors' positions are incorrect.3 In light of this perceived influence, companies go to significant lengths to avoid conflicts with proxy advisors by seeking their guidance in advance on management proposals and by conforming proposals to the proxy advisor's published guidelines.