These firms have an outsize influence on Corporate America. The SEC needs to regulate them

Radhakrishnan Gopalan, professor of finance; Todd Gormley, associate professor of finance; and Todd Milbourn, the Hubert C. & Dorothy R. Moog professor of finance, all at Olin Business School

Increasingly, investors are relying on proxy advisory firms to help them decide how to vote their shares during shareholder meetings. The research these firms provide can help a pension fund decide whether to vote its shares in favor of appointing a certain board member, or an asset manager to vote her stake for or against a corporate takeover.But the proxy advisory industry’s rapidly growing popularity poses a problem.

The industry is currently dominated by two key players — Institutional Shareholder Services and Glass Lewis — giving these firms immense power over some crucial votes in Corporate America.The growing reliance on this industry and the concentration of power within it has increased calls for greater regulation.

Indeed, the SEC needs to regulate proxy advisers and require more transparency and accountability from the industry.

Read the full piece in CNN Business.
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