Institutional Investors And The use of Intermediaries

Proxy advisors play an important role in the decision making process of institutional investors in regard to ballots to be cast in the general annual meetings of the companies in their portfolio. Thereby they help the institutional investors make a well-informed decision i.e. fulfill their fiduciary duty. Besides their function as information intermediaries proxy advisors take care of all ancillary aspects of balloting a vote through the voting chain. Both scholars and regulators have been examining the (potential) influence or power of these agencies. This thesis examines the current state of the proxy advisory industry and the research conducted by academic scholars and regulators on proxy advisors. In the academic literature research on proxy advisors is generally limited to examining the statistical relation between the advice given by proxy advisors and the actual votes cast by institutional investors. In this thesis a different perspective is taken and it is argued that the proxy advisory industry is an essential and influential link in the voting chain.