You finally did it. You opened the brokerage account. You bought your first shares. Maybe you picked a few companies you actually know. Maybe you went the boring-and-responsible route and bought an index fund.
Congratulations. You're officially an investor. Well… sort of.
Because here's the part nobody tells you when you're downloading the app, watching the little green numbers bounce around your screen and congratulating yourself for finally getting serious about your financial future:
You may own the stock, but you don't necessarily control the vote. And that little distinction turns out to be a pretty big deal.
Millions of Americans are investing for the first time. Younger workers are putting money into 401(k)s, IRAs and brokerage accounts, hoping that a few decades of saving and compounding will eventually buy them something better than a second job at age 72.
Collectively, Americans own enormous pieces of corporate America. But when those companies hold votes over directors, executive compensation, mergers or shareholder proposals, the person whose money is invested isn't necessarily the person making the decision.
Instead, much of that voting power is concentrated in the hands of giant institutional investors. And those investors often turn to another group you've probably never heard of: proxy advisory firms.
Yes, “proxy advisory firm” sounds about as exciting as a tax seminar. But these companies have a remarkable amount of influence.
Institutional Shareholder Services, known as ISS, and Glass Lewis dominate the proxy-advisory industry. Research from the Club for Growth Foundation estimates that the two firms account for roughly 97% to 98% of the market.
Think about that for a second. Two companies operate at the center of a system that can influence how huge numbers of shares are voted across corporate America.
And you probably didn't know their names until now. That's the weird part.
We've spent years arguing about billionaires, Big Tech, Wall Street, woke corporations and government overreach. Meanwhile, an enormous amount of corporate power has been accumulating inside a corner of the financial system that most ordinary investors never see.
The problem isn't that proxy research exists. It can be useful. A giant investment firm may hold pieces of thousands of companies. Nobody expects some exhausted portfolio manager to spend Tuesday night reading through every corporate election.
The problem is what happens when convenience becomes concentration. A proxy advisor makes a recommendation. An institutional investor may rely heavily on that recommendation. Millions of Americans' retirement dollars are sitting underneath the investment.
The person whose money is ultimately at risk may have absolutely no idea why the vote went the way it did. It's a little like showing up to a restaurant, ordering dinner, paying the bill and then discovering that somebody three tables away decided what you were eating. You technically paid for it. Good luck getting the steak.
This is where a seemingly boring Wall Street issue becomes a very American one. Because capitalism depends on ownership. If you own something, you should have meaningful rights connected to that ownership. And if someone else is exercising those rights on your behalf, there should be a pretty good explanation of who they are, what they're doing and why they're doing it.
The Club for Growth Foundation (CGF) recently released research examining this problem, including the relationship between proxy advisors and activist investors and the broader question of transparency in corporate governance.
The research raises concerns about a system in which enormous voting influence can become several steps removed from the actual investor. That should make anyone who believes in free markets pause.
Not because every proxy advisor is evil. Not because every institutional investor is secretly plotting something. And not because every activist investor is a corporate villain. Some aren't.
But markets don't become freer simply because the people exercising power work for private companies instead of government agencies. Concentrated power is still concentrated power.
There is another reason this deserves attention, particularly now: national security. America has finally begun taking seriously the idea that economic security and national security are inseparable. We care about who controls semiconductor manufacturing, critical minerals, energy infrastructure, telecommunications and pharmaceutical supply chains.
We care about foreign ownership of strategically important American companies. But ownership isn't the only way to exercise influence.
CGF’s research also raises questions about how foreign-affiliated capital and investors can potentially gain influence through activist and voting structures.
Now, this doesn't mean every foreign investor is a threat. It also doesn't mean proxy advisors are foreign agents or that someone in Beijing is sitting around deciding whether your favorite American company needs a new CEO.
It means we should know who is exercising influence over strategically important American businesses. That's not xenophobia. That's due diligence.
And it's especially relevant to a generation of investors who have been told that buying an index fund means they are simply owning a tiny piece of America. They are.
But increasingly, they are also participating in a financial system where someone else may be deciding how that ownership is exercised. That's the part worth fixing.
The solution isn't government deciding which companies deserve to win. Conservatives shouldn't want Washington picking corporate directors or micromanaging boardrooms. The solution is transparency.
Proxy advisors should have to disclose how their recommendations are produced. Conflicts should be visible. Errors should have meaningful correction mechanisms. Institutional investors should take seriously the fact that they're exercising other people's voting rights.
And ordinary investors shouldn't have to earn a Ph.D. in corporate governance just to figure out who is voting their money.
The Department of Labor's recent guidance concerning proxy advisors and retirement-plan fiduciaries is part of a broader conversation about exactly these responsibilities.
The principle behind it is simple: If you're exercising power over someone else's retirement money, you should have responsibilities to the person whose money it is.
That isn't an attack on capitalism. It's actual capitalism.
America doesn't need fewer investors. We need more of them. We want young people opening brokerage accounts, buying stocks, funding IRAs and building wealth instead of leaving every dollar in a checking account until inflation eats it alive.
But we also shouldn't tell a new generation that they've become owners while quietly handing the most important ownership decisions to a tiny group of professional gatekeepers they have never heard of.
You bought the stock. You saved the money. You took the risk. Maybe it's time you knew who gets to cast the vote.
