The release of the Conference Board report ‘Just What Is the Corporate Director’s Job?’ in the United States renewed attention regarding the role of the board of directors of a public company. It also raised a related question: just what is the proxy adviser’s job, and why do we care? The report suggests that proxy advisers perceive the board’s role as executing a series of tasks and lacking a coherent whole. To understand how this may affect companies and investors, we need to look at how proxy advisers came to be, why they have so much power, and how their function might be improved.

The post World War II period has seen an enormous increase in the size of global capital markets and in the speed at which money moves. Ever greater care on the part of regulators, companies and investors alike as to understanding the parties’ responsibilities and their role in driving increased value for their various beneficiaries has been required. In the mid 20th century, for example, a fiduciary could invest only in blue chip bonds. As markets evolved, such rules were clearly costly and regulatory focus shifted from defining allowed investments toward trying to clarify the standards of behaviour entailed for fiduciaries responsible for someone else’s money.

Oct-Dec 2017 Issue

Solon Group, Inc.