**GAO-07-765**                      Published: Jun 29, 2007. Publicly Released: Jul 30, 2007.                  

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## Highlights

At annual meetings, shareholders of public corporations can vote on various issues (e.g., mergers and acquisitions) through a process called proxy voting. Institutional investors (e.g., mutual funds and pension funds) cast the majority of proxy votes due to their large stock holdings. In recent years, concerns have been raised about a group of about five firms that provide research and recommendations on proxy votes to their institutional investor clients. GAO was asked to report on (1) potential conflicts of interest that may exist with proxy advisory firms and the steps that the Securities and Exchange Commission (SEC) has taken to oversee these firms; (2) the factors that may impede or promote competition within the proxy advisory industry; and (3) institutional investors' use of the firms' services and the firms' potential influence on proxy vote outcomes. GAO reviewed SEC examinations of proxy advisory firms, spoke with industry professionals, and conducted structured interviews with 31 randomly selected institutional investors. GAO is not making any recommendations.

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## Topics

Business Regulation and Consumer Protection

CompetitionConflict of interestsCorporate cultureFunds managementInvestment companiesInvestment planningRisk managementSecuritiesStocks (securities)VotingCorporationsMutual funds