Subject: Subject: File No. 4-725
From: Jared Whitley

Dec. 19, 2018

A new American Council for Capital Formation (ACCF) study about errors in proxy advisory voting reminded me of this dictum. The first-of-its-kind study seeks to quantitatively determine whether proxy advisors impose a real cost to ordinary investors. Unsurprisingly, the study finds numerous problems in recommendations made by proxy advisory firms.
Proxy Advisers came to be what they are today through a requirement made by the Securities and Exchange Commission that investment management funds submit proxy votes for all companies in which they own shares. Given the vast number of stocks typically held in managed funds, most investors rely on a proxy advisory firm for guidance so they can focus on managing their portfolio. What’s more, there are two firms that comprise approximately 98 percent of the market, Glass Lewis and Institutional Shareholder Services (ISS). As finance has become increasingly complex, proxy advisory firms have become more powerful in a climate filled with never-ending litany of environmental, social, and governance guidelines being touted by activist investors.
Proxy fights represent a way for politically engaged entities to pursue their favored policies, often negating the interests of actual shareholders - making money. The needs of retail investors to prepare for retirement or buy a home be damned.
The SEC is currently evaluating the proxy process, and numerous voices from academia and business are voicing the need to constrain the proxy advisory firms.

Jared Whitley
Principal, Whitley Political Media, LLC