Casting a proxy vote

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MARY REICHARD, HOST: It’s Tuesday, the 9th of September.

Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher.

First up: When your money votes against you.

Billions of dollars in Christian-owned investments may be working in opposition to Biblical values.

That’s because a handful of powerful firms control how most shareholder votes are cast. WORLD’s Josh Schumacher has the story of Christians calling for change.

JOSH SCHUMACHER: Ruth and Rudy Poglitsch have an exchange-traded fund that owns shares in various companies. Earlier this year, Ruth Poglitsch got an email from the investment firm that manages their fund.

POGLITSCH: So when I got this, my first thought was, ‘Oh, wow, what a brilliant idea.’

The email claimed that with the click of a few buttons, she could ensure the shares she owned would be supporting her beliefs at upcoming shareholder meetings—without her needing to do anything else.

Poglitsch is Roman Catholic. The email offered her the option to sign up for a Catholic faith-based policy option crafted by Institutional Shareholder Services. The document’s title indicated that it would make sure her shares were voting for policies supporting her Catholic values.

Poglitsch decided to dig into the details before she digitally signed the dotted line. She’d had a bad experience before with stuff hidden in the fine print, even when the word “Christian” was involved.

She says it’s a good thing she took a closer look:

POGLITSCH: What you see is that again and again and again here the the values that they are expressing that they will be voting on have very very little to do with Catholic values.

The fine print revealed that her shares would support pro-LGBT workplace policies, climate-conscious initiatives she personally didn’t agree with, and they would support granting employees’ homosexual partners the same benefits as spouses.

SCHWARZENBERGER: I know at least for the last 20 years that these guidelines have been voting in a way that is very much pro-ESG…

Tim Schwarzenberger is an investment portfolio manager at a Christian investment firm. He says that proxy voting advisory firms have a track record for playing fast and loose with what it means to actually vote in favor of Christian values in company boardrooms.

SCHWARZENBERGER: It's just gotten progressively worse.

Schwarzenberger says that proxy voting advisory firms’ faith-based options aren’t actually all that different from their default policies.

SCHWARZENBERGER: So basically what they do for their Catholic policies, they just basically are using the same thing they just throw in a couple of Catholic words here there.

One of the two giants dominating the proxy voting industry is a company known as Glass Lewis. It told me earlier this year that their Catholic faith-based policies were crafted to reflect the values of select clients, not necessarily every Catholic.

But many Christians in the finance industry are calling for greater transparency from fund managers and proxy voting advisory firm, and are calling for Christians to take back control of their votes.

For WORLD, I’m Josh Schumacher.

REICHARD: Joining us now to discuss this story further is Jerry Bowyer. He’s CEO of the investment consulting organization Bowyer Research and a WORLD Opinions contributor.

Jerry, good morning.

JERRY BOWYER: Good morning to you, Mary.

REICHARD: Jerry, can you explain how proxy voting works, and why these two companies control so much of the process?

BOWYER: Proxy voting is one of those obscure things in the area of finance that almost nobody understands and almost nobody knows what's going on inside of it, but is incredibly culturally and financially important. So it's one of those zones of low transparency but tremendous influence. So the way it works is if you own investments through a mutual fund or an ETF—which is something very similar to a mutual fund—and these are the things that you would typically have in a 401k plan or an IRA, you have given away your vote to that asset manager: a BlackRock, a Vanguard, a State Street. Or a “biblically responsible investment company.” And we need to loop back to that, because just because someone says they're biblically responsible doesn't mean they're biblically responsible.

So you have a vote as a shareholder, just like you have a vote as a citizen in America. We have a vote as a shareholder in a company, but when you use an asset manager, one of these funds, you are giving your vote to them, and they're voting on your behalf. Well, most of them don't want to bother to learn everything that's on the ballots of companies to vote on, because there's thousands and thousands. A typical portfolio might have 15 or 20,000 proposals to be voted on. So they depend on outside “objective experts,” proxy advisory services. And those proxy advisory services make recommendations on how to vote, but in reality, they don't really function like recommendations. They pretty much automatically get voted quite often according to those recommendations.

Those proxy advisory services have long been the subject of activism from people in the ESG—Environmental Social Governance—and DEI movements, and so they’ve been pulled to the left of where the country is and where most of the shareholders are. So when your money’s in a fund, you think you're just investing, but you’re also voting. And what are you voting on? Yeah, you're voting on things like board members and the auditor, but you're also voting on things like abortion or divesting from Israel or puberty blockers, and on Second Amendment issues or fossil fuel issues, and there's a pretty good chance, unless you're somebody who's pretty left wing, you don't like how your money is being voted.

REICHARD: You know, I recall the retired Justice Stephen Breyer saying that he throws those proxy materials right in the trash as soon as he gets them. After talking to you over the years, I don’t do that anymore. What advice do you have for people who don’t know what to do with proxy statements?

BOWYER: Well, I would make a distinction between people who just own directly and don't have any help from a financial advisor, and people who do have help from a financial advisor. If you have help from a financial advisor, then make them help. It is endemic in the industry to just ignore this function. Often the advisors say, just throw it away. Why do the advisors put this responsibility on their investors, because they don't know how to handle it. Well, they need to learn how to handle it. This is a vote. This is a right. This is important. This is an exercise of social responsibility or the abdication. We help financial advisors help their clients with this. So there's no excuse. So if you're just an ordinary investor and you've got a financial planner or advisor or a CPA or someone who's doing this for you, bring it up. And if they cannot tell you how you should vote or how you're already voting, including with your money that’s in ETFs and mutual funds, well, insist.

REICHARD: We heard about Catholic voting guidelines. Are there other religious value guidelines, and do they have the same problems?

BOWYER: There are none offered by the major proxy advisory services other than Catholic guidelines. And let me tell you, the Catholic guidelines are Catholic in name only. They are not even voting pro life. And I've looked at these closely, I've read the guidelines in detail, and I've looked at the funds that are being voted according to these guidelines. And this is something that proxy advisory services are aware of. And a lot of asset managers who say, “Well, we're faith based, we're Catholic based” … I look at their voting record. You would not be able to tell from their voting. They're voting for proposals that are telling companies to divest from pro life states. They're voting against proposals to say to a company, “you endorsed Roe v. Wade, you should really count the risk of taking sides on this issue.” They're voting against proposals that are trying to stop companies from paying for puberty blockers. When I look at the actual votes, none of the Catholic advisors or asset managers that I can find the results are actually Catholic. And since evangelical Protestants are also pro life, then they're not evangelical Protestant either.

REICHARD: Assuming the average person has an investment advisor, how would that person check on his or her say retirement investments? And if it’s voting according to his or her values?

BOWYER: You would ask your advisor, and there's a high probability your advisor would not know what you're asking about. And what they're going to do is they're going to come back with some reassuring answers, and let's say they're a Christian financial advisor. In reality, if you have an asset manager who is just filled up with faith language, and you look at their actual voting, you can tell they're not paying any attention to it. This has been going on for decades, and Christians have not been paying any attention to it, and the other side has been paying attention to it, so no one was paying attention to the past. Fine. Now you have to. I understand most people listening aren't advisors. Most of you are clients. Well, be demanding clients. Make sure that your money is not being used to fight against everything you believe in.

REICHARD: Jerry Bowyer is CEO of Bowyer Research and writes for WORLD Opinions. Jerry, thank you so much!

BOWYER: Thank you Mary.

REICHARD: To read more about this story, look for Josh Schumacher’s article in the August issue of WORLD Magazine.

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