WHAT A TRILLION-DOLLAR TANTRUM TELLS US ABOUT SHAREHOLDER VOICE AND RESPONSIBLE GOVERNANCE.

Recently Tesla CEO Elon Musk publicly lashed out at institutional investors opposing his trillion-dollar pay package, calling them “corporate terrorists.” His criticism singled out ISS (Institutional Shareholder Services), one of the best-known proxy advisory firms, accusing them of obstructing growth and innovation.

The accusation made headlines, but lost in the noise was a more important and far less sensational truth: proxy advisors are not the ones making decisions. They are tools used (by institutional investors, endowments, foundations, and pension plans) to navigate the increasingly complex world of shareholder voting.

Every shareholder, whether an individual with one share or a large institution with millions, has the right to vote on key issues at a company’s annual meetings. These votes, known as proxies, include decisions about executive compensation, board appointments, mergers, environmental disclosures, and other governance matters. For institutional investors, voting proxies is less of a right than a fiduciary duty. But with thousands of holdings and hundreds of annual meetings, voting thoughtfully on every issue is simply not feasible logistically.

That’s where proxy advisory firms come in, like ISS and Glass Lewis. They analyze company proposals, provide research and voting recommendations, and offer clients a range of customizable voting policies; these policies are designed to reflect different investor priorities, from conventional governance standards to climate or social impact frameworks.

So, are proxy advisors ESG firms? Not exactly. For example, while ISS has an ESG data and analytics division (ISS ESG), the core proxy advisory business is distinct; their primary role is operational and advisory. They streamline the voting process and offer policy frameworks, but the client chooses the framework. This distinction is critical; it’s important to understand that using a proxy advisor does not automatically mean you’re voting with an ESG agenda. Proxy firms provide the infrastructure, but it’s the investor’s philosophy and instructions that define the outcome.

Sound a bit overwhelming? That’s where shareholder advocacy organizations like As You Sow come in. They help surface both glaring and below-the-radar issues, like climate disclosure, racial equity, and corporate political activity, that may not yet be priced into markets but can carry long-term consequences. These groups make it harder for investors to overlook risks either hiding in plain sight or just out of sight. By bringing these proposals to the ballot, they create space for shareholders to engage more fully with the responsibilities, as well as opportunities, that come with ownership.

Proxy voting is a crucial strategic lever, allowing investors to express views on leadership, long-term risk, and alignment with institutional values. In a time when stakeholder trust, climate risk, and social responsibility are increasingly material to long-term performance, as cliché as it sounds, your vote matters. Even for clients focused purely on financial performance, good governance is simply good risk management.

The backlash against proxy advisors tells us more about discomfort with accountability than it does about the advisors themselves. What’s being challenged isn’t just, or even primarily, a pay package, but the idea that shareholders, including mission-driven ones, have the right and responsibility to weigh in.

As fiduciaries, we believe in using that right carefully, but with conviction. Proxy advisors don’t replace judgment; however, they can help make it more manageable. And in today’s world of eroding institutional safeguards, where governance is under pressure from all sides, making informed, values-driven decisions is more important than ever for achieving sustainable, values-aligned solutions able to get ahead of tomorrow’s problems.