Negative leaning WSJ article on securities lending vs. shareholder voting

How Investing Giants Gave Away Voting Power Ahead of a Shareholder Fight

BlackRock, Vanguard and Fidelity were among the largest investment firms in GameStop that decided to forgo ballots by keeping shares on loan

GameStop Corp. shareholders vote this week to resolve a fight over the embattled videogame retailer’s board. But the company’s largest investors won’t cast much of a vote.

The three biggest money managers in GameStop reported that their funds held some 40% of shares in the first quarter. When it was time to commit to voting, they controlled roughly 5% of ballots, according to count estimates reviewed by The Wall Street Journal. Each share of GameStop normally grants an investor one vote.

The main reason for the disparity is that BlackRock Inc. Vanguard Group and Fidelity Investments chose to loan out substantial GameStop shares for the rich stream of fees their investors stood to gain, according to people with knowledge of the matter. Firms from Dimensional Fund Advisors to State Street Global Advisors made similar choices to give up their full voting power.

Other investors are stepping up in the power vacuum left by the biggest firms. Scion Asset Management, whose founder Michael Burry became famous after the book and movie “The Big Short,” said it was backing GameStop.

“Securities lending is an important revenue opportunity for large institutional investors. But there’s also a responsibility to vote shares in a fiduciary manner,” said Kurt Schacht, who leads policy work for the CFA Institute.

“There can be a clash of both responsibilities. It’s up to the institution to decide what is best.”

The full article is available at https://www.wsj.com/articles/how-investing-giants-gave-away-voting-power-ahead-of-a-shareholder-fight-11591793863

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