To most retail investors, a company's proxy-vote form may just be another piece of junk mail to toss in the trash. According to Broadridge Financial Solutions, individual stockholders voted only 30% of their shares during 2013's proxy season, the period from January through April when many companies hold their annual meetings. Mutual fund investors probably think even less about their portfolio companies' ballots -- which range from board elections to executive compensation to "poison pill" plans -- instead trusting those decisions to the fund managers.
What you may not realize, however, is that portfolio managers often outsource the voting decision one step further, to a third-party firm that holds zero fiduciary responsibility. That so-called proxy adviser is likely to be either Institutional Shareholder Services, whose parent company, MSCI, creates the indexes underlying many ETFs, or San Francisco-based Glass Lewis, owned by the $130 billion Ontario Teachers Pension Plan. Together the two firms control an estimated 97% of the global proxy advice market and have the ears of institutional investors holding more than $30 trillion in assets.