The Regulation of Proxy Advisors

Abstract

Proxy advisors provide institutional investors, particularly funds with widely-diversified portfolios, with recommendations for the exercise of their shareholder voting rights. This gives proxy advisors influence on the fate of stock corporations. The power of proxy advisors has attracted the attention of regulators throughout the world. The following contribution gives an overview of, and evaluates the market for, proxy advice from a law-and-economics perspective, analyzes empirical data gathered to date about their usefulness, and discusses various approaches to possible regulation.

Keywords: corporate governance, proxy advisors, ISS, Glass Lewis, shaerholder voting, shareholder activism, institutional investors

JEL Classification: K22