SHS Web Conf.
Volume 179, 20232023 6th International Conference on Humanities Education and Social Sciences (ICHESS 2023)
|Number of page(s)
|Community Management and Public Affairs Service
|14 December 2023
Proxy Advisors: A Double-Edged Sword for Institutional Investors
Law School, University of Edinburgh, Old College, South Bridge, Edinburgh, United Kingdom
* Corresponding author: firstname.lastname@example.org
Institutional investors who own shares in hundreds of companies and have heavily diversified portfolios face significant challenges. More importantly, investee companies usually organise their annual general meetings at the same time, which creates a huge logistical and administrative workload for institutional investors. Also, the “free riding” is also a frequent problem, which greatly reduces the incentive for institutional investors to participate in corporate governance. Hence, the proxy advisors were introduced because of two factors: regulatory policies demand and market demand. Proxy advisors do have a lot to offer to corporate governance, and many empirical studies have demonstrated that proxy advisors play an important role in director elections, say-on-pay and ESG. However, there are some negative effects, such as the multiple conflicts of interest, ineffective and incomplete information and insufficient transparency, institutional investors’ over-reliance on proxy advisors. In addition to having an impact on corporate governance, proxy advisors have a significant effect on the engagement of shareholders. There are three main points. Firstly, proxy advisors stimulate institutional investors' participation in corporate voting through lowering the costs. Secondly, proxy advisors mitigate the collective action dilemma of institutional investors, and the third one is about the robo-voting problem. From the discussion of the essay, the impact of proxy advisors on shareholder engagement is significant, and while there is a degree of negative impact, the positive impact of proxy advisors is more significant and should be sustained and improved.
© The Authors, published by EDP Sciences, 2023
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Current usage metrics show cumulative count of Article Views (full-text article views including HTML views, PDF and ePub downloads, according to the available data) and Abstracts Views on Vision4Press platform.
Data correspond to usage on the plateform after 2015. The current usage metrics is available 48-96 hours after online publication and is updated daily on week days.
Initial download of the metrics may take a while.