Value vs. Values
Recapping Morningstar's Proxy Power Shift event and exploring fiduciary responsibilities in a rapidly democratizing financial sector
Last week, the Stakeholder Labs team attended Proxy Power Shift hosted by Morningstar and Proxymity during New York City Fintech week. This event showcased the technology disrupting the proxy voting and shareholder engagement landscape, featuring a series of high-impact presentations and panel discussions from some of the industry’s leading startups.
A central theme of the event was disintermediation—the reduction of intermediaries between shareholders and companies—which aligns closely with Stakeholder Labs' product strategy. Engaging with leaders from various companies who are exploring this concept in diverse ways proved to be invaluable. With many companies facilitating 'pass-through' proxy voting for fund managers and institutions, the event ignited a comprehensive and vigorous debate on the ramifications of empowering less financially savvy individual investors to participate in proxy contests. A critical aspect of this discussion focused on how we collectively define fiduciary responsibilities and balance "value vs. values" within a more democratized and interconnected global financial system.
Han Yik, Senior Advisor – Stewardship at the 8th largest US pension fund (New York State Teachers’ Retirement System) does not offer pass through voting to their contributors and Yik focused him remarks on the importance on remaining apolitical and profit focused in a highly polarized social environment. Yik’s ‘shareholder primacy’ approach towards capital allocation believes that moral or social judgement of corporate behavior should only be considered in the event that it jeopardizes profits. As Yik articulated, the “headline risk” of a company using child labor practices (and the associated stock selloff) is the driver of an investment decision as opposed to the child labor in itself.
Harvard Professor and Nobel Prize-winning economist Sir Oliver Hart highlighted the societal obligations that corporations hold towards the communities they impact. He pointed out how corporations often maximize profits by exploiting legal and regulatory loopholes, to the detriment of societal and environmental well-being. Although 'pass-through' voting was not central to Hart's remarks, he emphasized the need for fund managers and fiduciaries to align decision-making with the values and beliefs of their investors and contributors, suggesting methods like surveys or advisory boards to capture these preferences.
George C.W. Gatch, Chief Executive Officer of J.P. Morgan Asset Management, expressed his concerns regarding new pass-through voting mechanisms, like BlackRock’s Voter Choice, which he believes primarily shift corporate voting power from fund managers to proxy advisory firms like Glass Lewis and ISS. In lieu of offering ‘pass-through’ voting, Gatch highlighted J.P. Morgan’s response to the growing demand from retail investors for values-driven investment opportunities, by focusing on actively managed funds that prioritize board belief systems, including sustainability.
Interested in learning more about the Value vs. Values? Professor Ann M. Lipton of Tulane University explores values investing within the context of corporate & securities law and highlights the historical evolution of the debate. (H/T
)In addition to thoughtful panel discussions, the event featured rapid-fire pitches from companies, each presenting their unique solutions:
Iconik: highlighted their automated voting system, designed to help investors vote their shares effortlessly and align their investments with their values.
Verity: introduced their Sustainable Finance Platform, aiming to integrate sustainability more deeply into investment processes.
Troop: discussed their new age asset stewardship technology, designed to enhance how investors can oversee and engage with their investments with their values in mind.
Tumelo: emphasized their focus on pass-through voting among fund managers, offering investors more direct influence over corporate governance.
Sustainalytics: presented their ESG research capabilities, which support investors in making more informed decisions.
Shareholder Vote Exchange: presented a novel concept where investors can buy, sell, and exercise shareholder votes, potentially increasing engagement and returns.
Proxymity: rounded out the showcase by presenting how they are connecting world’s ecosystem of issuers, intermediaries, and investors digitally in real-time, bringing more transparency, efficiency, and accuracy to traditional paper-based processes.
In the wake of Disney's historic and costly proxy battle with Trian Partners, Stakeholder Labs highlighted the important cost-saving potential of our digital shareholder verification technology. Regardless of whether a public company is involved in a proxy contest, its leadership should proactively seek to answer fundamental questions: "Who are our shareholders? What do they care about? How are we growing their lifetime value?" Our goal with digital shareholder verification is to reduce corporate costs by facilitating direct shareholder communication and increase engagement through personalization. This approach also allows companies to more effectively resonate with and respond to their shareholders' values and expectations. As the landscape of proxy voting and shareholder engagement continues to evolve and more startups bring innovation to a traditional industry, Stakeholder Labs is proud to be at the forefront of this shift. We advocate for technology that enhances company value by helping it align more closely with their shareholders’ values, creating a more democratic and interconnected financial ecosystem.
This week on After Earnings: REE Automative
Hosts Katie Perry and Austin Hankwitz engaged in a fascinating discussion with Daniel Barel, the co-founder and CEO of REE Automotive REE 0.00%↑ . The episode highlighted the burgeoning sector of electric vehicles, focusing on the challenges and innovations shaping the industry.
Innovative Business Model: Barel detailed REE Automotive’s unique approach to the EV market, emphasizing their modular, white-labeled EV systems designed for commercial use, particularly in the small to midsize trucking industry. This system allows other manufacturers to adopt their technology easily, fostering a collaborative rather than competitive environment.
Market Differentiation and Technological Edge: A significant portion of the conversation highlighted REE Automotive's proprietary "drive by wire" technology, which integrates core vehicle components into a single module. This innovation not only streamlines manufacturing but also enhances vehicle reliability and maintenance efficiency, distinguishing their products in the EV space.
Strategic Market Focus and Growth Plans: The dialogue explored the company’s targeted approach to the midsize commercial truck market, a niche that benefits from mature charging infrastructure and lucrative incentives. Barel shared ambitious sales targets, aiming for $1 billion in sales by 2026, with strategies to achieve this through a combination of direct sales and partnerships with established OEMs.
Challenges and Adaptations in Commercial EV Adoption: The discussion also covered the specific challenges of transitioning commercial fleets to EVs, such as the need for reliable charging solutions and overcoming initial capital expenditure hurdles. Barel explained how incentives and total cost of ownership calculations are crucial in convincing fleet operators to switch to EVs.
Leadership and Investor Engagement: Lastly, the interview provided insights into Barel’s leadership style and his proactive approach to investor communications. He emphasized transparency and frequent updates as key to maintaining investor trust and driving the company forward.