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Corporate Governance

: The Harvard Law School Corporate Governance Blog

The Future of Institutional Share Voting: Three Paradigms

By Harvard Law School Program on Corporate Governance

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Editor?s Note: Charles Nathan is Of Counsel at Latham & Watkins LLP and is co-chair of the firm's Corporate Governance Task Force. This post is based on a recent Latham Corporate Governance Commentary, and follows up on an earlier Latham Commentary, The Parallel Universes of Institutional Investing and Institutional Voting, which is available here.

In a recent Corporate Governance Commentary, titled "The Parallel Universes of Institutional Investing and Institutional Voting, [1]" we observed the increasing discontinuity at most institutional equity investors between the persons who make the buy and sell decisions (or who create and maintain the quantitative models that make those decisions) and those who make the decisions on how to vote portfolio shares. We analogized the separation of the two functions to parallel universes to highlight the autonomous nature of each function. While we noted that this pattern is not universal among institutional equity investors, we stated our belief that it is the prevailing method by which institutional investors solve the financial dilemma created by the large, and for some institutions literally overwhelming, number of votes they are required to cast each proxy season by the federal government?s imposition of a fiduciary duty to vote all portfolio shares on all matters brought to shareholders.

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Full post as published by The Harvard Law School Corporate Governance Blog on July 23, 2010 (boomark / email).