Investment managers looking for advice on how to cast votes on shareholder proposals at portfolio companies could be getting questionable guidance from advisory firms, according to a new economic report. The growing influence of these firms is coming under scrutiny by federal regulators.
Proxy advisory firms, which provide advice to fund managers and other investors that are required to vote on questions put to shareholders of companies in their funds, have grown too powerful, with little oversight over whether their recommendations serve the best interests of individual investors, says Capital Policy Analytics. The report concludes:
The potential conflicts of interest, factually inaccurate guidance, and a lack of transparency that can arise from a reliance on proxy advisory firms tend to dilute the focus on stock performance and maximizing returns in favor of other special interests.
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