The Sunshine of Disclosure And Some Intimidation, Too

Jonathan Macey is right that shareholders and investors should "ignore" the widely hyped CPA-Zicklin Index, which is methodologically flawed and inconsistent year over year. Fortunately, shareholders have been getting this message. Not only have 82% of shareholders in Fortune 250 companies voted against political-spending-related shareholder proposals in the last two years, but between 75% and 77% have rejected the CPA’s own "model shareholder proposal" for political-spending disclosure. No such proposal has received majority support over board opposition at a large American company.

Those shareholders voting in favor of the CPA’s proposal are largely labor-affiliated pension funds and "social investing" funds, whose interests depart from the average diversified investor’s, or institutional investors blindly following the recommendations of proxy advisers like Institutional Shareholder Services, which receives significant revenues from those same special-interest investors and generally backs many more "social policy" shareholder proposals than the average investor.

Bruce Freed, the former Democratic congressional staffer who heads the CPA, regularly "reports" inflated shareholder support for his proposals by ignoring institutional investors’ abstention votes, contrary to corporate bylaws, and he attempts to create bandwagon effects by listing companies that offer certain disclosures (without clarifying that many such companies don’t disclose what Mr. Freed is asking from others). Rather than getting on that illusory bandwagon, corporate leaders should listen to the vast majority of their shareholders and preserve their important ability to play an active role in the political process.

This piece originally appeared in Wall Street Journal

This piece originally appeared in The Wall Street Journal