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The Rite of Spring: Preparing for the 2016 Proxy Season

By Chris Wightman and Juan Bonifacino

In the summer of 1986, one of our firm's senior advisers, Rich Koppes, sat down to lunch in a stately New York restaurant with the corporate secretary of a Fortune 100 company. As the newly minted General Counsel of the California Public Employees Retirement System (CalPER), Rich had been tasked with building up its corporate governance department. He started by contacting the largest companies in CalPERS' portfolio to gauge the current state of engagement, which prompted the lunch. The conversation was friendly, but when asked about how often the board spoke to its institutional investors, the corporate secretary replied, “to be honest, Rich, we just don't think about people like you.”

Oh, how times have changed. Driven by economies of scale and the ever-growing popularity of low-cost mutual funds and index investing, large institutional investors like Blackrock, Vanguard and State Street have become dominant players in the asset management industry. Former SEC Commissioner Luis Aguilar recently noted that a decade into our new century, institutional shareholders now manage over 67% of all public U.S. equities and over 73% of the outstanding equity of the 1,000 largest U.S. corporations.

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