Nov. 01, 2021
Dear Sir or Madam, I am writing with a short comment on the proposed N-PX rule. I am a tenured associate professor of finance at the University of Oxford. My research focuses on how so-called "passive" institutional investors engage (or don't engage) in corporate governance, and which outcomes that has on firm behavior and market outcomes. To study these topics -- which are also an acute interest of the FTC and other competition authorities -- it is important to have high-quality data on both corporate ownership and control. Accurate filings by institutional investors regarding how they vote their share are crucial for that. The papers studying these issues is summarized in these two recent reviews of the fast-growing academic literature: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3046829 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3725305 At present, it is difficult to obtain a complete and accurate picture of corporate ownership from the various SEC filings (13F,D,G ; Form 3-4-5 ; proxy statements, etc.) due to their inconsistent formats, double filings of the same holdings on different forms, etc. The competition authorities do not have filings in their own right that would allow them to track who owns which firm. Direct competitors may be owned by 100% the same investors; the competition authority would not necessarily learn about it or even be able to learn about it, if not for the SEC filings. This highlights the importance of collaboration between the agencies, even though they have different objectives. Further, it is not directly evident from these forms which institutional investors de facto centralize voting across their different funds in a corporate governance and proxy voting office. Adding to these difficulties, when institutional investors allow their investors to directly vote their shares (as BlackRock plans to do from 2022), even more transparency may be lost. I encourage you to keep these issues in mind as you design the new rule. Although at present I only had limited time to write this comment, I stand at your disposal to detail any of the above or related thoughts. Kind regards, Martin Schmalz Park End Street Saïd Business School University of Oxford