The Handbook of Board Governance, 2nd Edition

49Proxy Scorecards Will Empower Investors

James McRitchie

Founder and Publisher, Corporate Governance (Corpgov.net); and Shareholder Advocate

In this age, and this country, public sentiment is everything—with it, nothing can fail; against it, nothing can succeed. Whoever molds public sentiment goes deeper than he who enacts statutes or pronounces judicial decisions.

—Abraham Lincoln, 1858¹

Executive Summary

Corporations have facilitated the most dynamic economic growth in history. Dispersed ownership has hampered their ability to address adverse externalities, like dark money and climate change. Mechanisms are needed to increase meaningful communications between Main Street investors and directors to ensure corporations reflect public sentiment. Ironically, the concentrated power of giant index funds presents an opportunity to address those issues through increased feedback mechanisms.

Real-time disclosure of corporate proxy votes will lead to competition among funds, based not only on historic costs and returns, but values expressed in vigorously debated proxy scorecards. Internet sites and phone applications will revolutionize how information is shared by investors and companies, allowing much wider participation in environmental, social, and governance (ESG) issues. Investors will have advocates. Directors will have constituents. Instead of being blamed for everything that goes wrong, corporations will be seen as fostering democracy and innovation.

Externalities and ...