On the Role and Regulation of Proxy Advisors
Michigan Law Review First Impressions, Vol. 109, p. 62, 2010
8 Pages Posted: 1 Feb 2011 Last revised: 3 Feb 2011
Date Written: January 31, 2011
The role of proxy advisors has increasing relevance because the Securities and Exchange Commission has recently undertaken a review of the mechanisms of proxy voting - less gracefully but perhaps aptly described as “proxy plumbing” - and the role of proxy advisors in that process. This short essay discusses the role of proxy advisors and their regulation. In particular, the essay addresses why institutional investors purchase corporate governance ratings and advice despite the fact that the advice appears to be of poor quality. The essay then discusses potential regulation of proxy advisors by the Securities & Exchange Commission.
Keywords: Proxy voting, proxy advisors, corporate governance ratings, corporate governance industry, RiskMetrics, ISS, proxy plumbing
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