Far too much power concentrated in hands of companies-Musk
2023.01.24 14:43
Far too much power concentrated in hands of companies-Musk
By Tiffany Smith
Budrigannews.com – In a tweet, billionaire Elon Musk claimed that advisers who advise shareholders on how to vote at company meetings lacked sufficient authority due to their influence over passive investment funds.
The question of whether such advisors have too much influence over corporate decision-making continues to be debated, and Musk’s remarks add to it.
Musk wrote in a tweet late on Tuesday:
Because so many passive/index funds outsource shareholder voting decisions to “shareholder services” companies like ISS and Glass Lewis, far too much power is concentrated in their hands.”
Clients like pension schemes receive recommendations from proxy advisers led by ISS and Glass Lewis on how to vote on everything from electing board members to approving executive pay and benefits.
Musk, the owner of Twitter and CEO of Tesla (NASDAQ:),, was responding to a Twitter thread:
started by Strive Asset Management founder Vivek Ramaswamy, who said that the biggest adviser, ISS, had a “staggering” impact on state investors, treasurers, and businesses in the United States.
The remarks are Musk’s most recent complaint about how markets work and follow previous criticism about how investors evaluate his controllable electric vehicle company Telsa from an ESG perspective.
When the advisers urged shareholders to vote against board recommendations or when they sought support for environmental resolutions, corporate executives and climate activists have typically voiced their criticism of the two proxy advisers.
The impact of the proxy advisers has been the subject of mixed evidence from academic reviews. In a 2010 paper, law professor Jill Fisch estimated that an ISS recommendation would shift between 6% and 10% of votes.
On Tuesday, via email, she stated that the current percentage is likely to be lower as a result of the sophistication of internal vote reviews conducted by high-ranking investors.
Additionally, Republican state officials in the United States have written to the two advisory firms to inquire whether their recommendations fulfilled their obligations to investors.
However, in contrast to Musk, state and national Republicans have also accused top passive fund managers of becoming too aggressive with their proxy votes, a claim that fund managers deny.
With the proxy advisers, Tesla has had its own disagreements. For instance, last year, both ISS and Glass Lewis recommended votes against two Tesla directors who were up for election due to the board’s “insufficient responsiveness” to a previous shareholder vote. Both of these votes were in support of an advisory proposal to increase investors’ ability to nominate directors.
The shareholder resolution was approved, and the two directors were supported by 68% and 64% of the votes cast, a lower percentage than is typical for large corporations.
