| Activism insight

Voce capital: Should shareholders accept poor governance, if the stock price has appreciated enough?

by | Jan 10, 2020

Voce Capital’s press release (May 13, 2019) in response to the recommendation by ISS caught our attention.

Voce Capital’s proxy campaign (2019) at Argo Group was predominantly focused on the corporate governance – not the stock price.

ISS recommended that shareholders vote for the incumbent directors.

Voce capital questioned whether it is appropriate for ISS to base the recommendation mostly on the stock price. In other words, if the stock price has appreciated over time, should shareholders accept poor governance? Voce argued that, if strong stock price is enough, why does ISS and other analysts spend time talking and writing about corporate governance.

Well, that’s a good point.

Corporate governance is neither a checklist nor an algorithm.

We have acknowledged from the beginning that Argo’s stock price has appreciated over time. If that’s the end of the inquiry, as it appears to have been for ISS, then with all due respect, there’s no need for a third-party to analyze or weigh in on this proxy contest.

If this campaign – which has been sharply fought and centered over corporate governance from the very beginning – can be dismissed simply by consulting the stock price, then what does that say?

Most fundamentally, if TSR is as paramount and decisive as implied by ISS’s report then why do all of the leading institutional investors and ISS itself spend so much time talking and writing about corporate governance?


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