Asset Managers Should Not Vote Shares They Don’t Own

Published in The Wall Street Journal.

“Maybe it is time for the SEC to require index funds to poll their investors and vote their shares only as specifically directed,” say Phil Gramm and Michael Solon (“Enemies of the Economic Enlightenment,” op-ed, April 16). They are so right, except it is not “maybe,” it’s time, period.

Asset managers should not be able to vote the shares they do not own to pursue their political notions or business purposes. Instead, they should be able to vote only when instructed by the real owners. That means voting by the principals, not by the agents. In this way, the asset managers would be treated exactly like the broker-dealers who control huge numbers of shares registered in street name, but must ask the real owners how to vote. It is indeed high time for the SEC to fix this very troubling anomaly in corporate governance.