One consequence of the COVID-19 pandemic has been a dramatic drop in the stock market. Even with the recent market recovery, the S&P 500 index remains nearly 14 percent below its peak value. This couldn’t come at a worse time for those close to retirement, both for their individual investments and the pension funds that support state and local defined benefit programs. One lesson here is that money managers, especially for pension funds, need to focus on returns for investors and, as Securities and Exchange Commissioner Hester Peirce explained, not be led by proxy-advisory firms to use social investing that results in lower returns.
Recently, the SEC began taking steps to constrain the firms that have been shaping corporate governance — and, in many cases, investment returns — since 2003, when the commission inadvertently created what we know as the proxy-advisory industry, which provides proxy-voting advice to institutions. This resulted in an unintended consequence of corporate governance being swayed by two major proxy-advisory companies.
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