In a report published on Monday, As You Sow accused State Street, Vanguard, BlackRock, and T. Rowe Prince of abusing their votes in order to favor company managers during stockholder disputes.
As You Sow’s report titled “Uncovering Conflict Of Interests: Proxy Voting Data Reveals Bias For Asset Managers To Favor Clients” was released on 20th May and since has conjured up controversy in the industry.
A representative of T. Rowe Price has labeled this accusation as “ludicrous”.
This is not the first time As You Sow has analyzed proxy votes, they have researched millions of such votes since January 2015. The advocacy group analyzed the compensation several asset management firms had received for administering and advising corporate retirement plans. In their report, they concluded that some fund managers voted with a bias for their clients. They cast votes for companies they had been providing their services to at a much higher rate than for non-clients.
Big fund managers are allowed to hold investments in companies but only when they aren’t providing advisory, or consulting services to them.
Their report suggests the votes done by State Street have been skewed the most by bias. They’ve shown a 14% bias favoring companies that compensate them.
As You Sow has proposed a solution for this problem as well. It should be necessary for fund managers to disclose their business relationships when casting votes. Or they can delegate votes to a neutral 3rd party while also rescuing proxy votes when a conflict arises. They also proposed the use of a more technological approach that will enable the fund managers to vote their proxies in one place, irrespective of the asset managers they invest in.