New Research Finds Large Investors Reject Nearly 40 Percent of Proxy Advisor "Against" Recommendations in Pay Votes

January 24, 2017

A new report by Proxy Insight which analyzed US and UK say on pay resolutions in 2015 and 2016 for 10 of the largest institutional investors found that although 90 percent of such investors' overall votes were consistent with ISS's recommendations and 83 percent were consistent with Glass Lewis's recommendations, large investors do not agree with proxy advisory firms "against" recommendations nearly that often.  The research found that in 2016, large investors agreed with ISS's "against" recommendations only about half the time (52 percent) and Glass Lewis's recommendations less than one-third of the time (30 percent).  The report provides a chart showing the 2014 and 2015 votes for each of the 10 investors reviewed, which include BlackRock, Dimensional Fund Advisors, Vanguard, State Street, Fidelity Management & Research, BNY Mellon, Goldman Sachs, Northern Trust, T. Rowe Price, and AllianceBernstein LP.  Among those investors, Northern Trust and BlackRock agreed with the fewest ISS recommendations in 2015 (12.7 percent and 25.4 percent, respectively) while Dimensional Fund Advisors and AllianceBernstein agreed with ISS most frequently (100 percent and 93 percent, respectively).  Although the results indicate that large investors may not agree with proxy advisory firm recommendations, the research does not account for the large number of smaller investors who do not have the resources to engage in independent proxy voting and align themselves closely or completely with proxy advisory firm voting recommendations.  This is a substantial issue especially for large companies whose equity ownership is widely dispersed.