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Contributions by Alan Brett
Assessing Control: Measuring And Assessing The Alignment Between Economic Exposure And Voting Power At Controlled CompaniesApr 25, 2019 Download Document
Where the controlling owners of a company have voting power that is disproportionate to their economic exposure, the company’s minority investors face some degree of increased risk. MSCI ESG Research’s ownership model enhances the ability of minority investors to assess ownership-related risks or benefits across two dimensions; it measures the level of control, and illuminates the motivations of the controlling entities. We extend this model by adding a third dimension, by measuring the extent to which economic exposure and voting power are disproportionate, regardless of the control mechanisms involved. This new framework could assist investors in assessing governance risk or in prioritizing company engagements.
Should entrenched boards be the priority for shareholders? We review proxy access adoption rates in the US and identify that while significant progress has been made, the companies that have adopted proxy access were mostly companies who were already inclined towards stronger shareholder rights, while the companies with entrenched boards, who might actually benefit most from shareholder nominations, have generally not yet been targeted.