The Disenfranchisement Of America’s Retail Investors Is A Real and Alarming Trend

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Nan Bauroth Member, Main Street Investor Coalition Advisory Council
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Last week, an article in one of America’s most prominent and respected media outlets attacked the Main Street Investors Coalition, a new organization that I help lead as a member of its Advisory Council. Our group advocates for regulatory reforms that we believe are in the best interests of retail investors.

I have no issue with the right of critics who disagree with our policy recommendations articulating their views. But instead of offering a substantive argument that helps advance the discussion, the piece dismissed our coalition as “funded by big business interests that want to diminish the ability of pension funds and large 401(k) plans… to influence certain corporate governance issues.”

The implication is that it required a sustained piece of investigative journalism to uncover the fact that our coalition is supported by “big money interests” when the business associations that support us are clearly listed as “partners” on our website, as they have been since the start. We have never tried to conceal their affiliation and even actively promote it in our press releases and opinions.

However, the most misleading statement in the article asserted, “the Main Street Investors Coalition has nothing to do with mom-and-pop investors.” Well, I am a “mom-and-pop investor.”

I joined the Main Street Investors Coalition because I believe proxy advisory firms, large institutional investors and public pension funds are operating in ways that harm the financial well-being of millions of American retail investors like myself, and I am trying to serve as a voice for others who feel the same.

When I elect to put my money into an index fund, I presume the fund’s managers are committed to maximizing my return, not promote a social cause — as do 78 percent of retail investors surveyed. Unfortunately, some fund managers now have decided that they have the right to pursue a particular agenda with our money without asking or even informing us.

That’s exactly why our coalition was formed: To remind those responsible for managing Americans’ retirement funds that their foremost duty is fiduciary in nature. The Main Street Investors Coalition advocates for changes to help preserve the investment opportunities that have made the American Dream possible for generations. The Coalition’s ultimate point is that the paramount duty of money managers must be maximizing the return on shareholder investments.

Toward that end, one of our primary goals is to empower retail investors by enabling them to more easily vote their ownership rights. Although the article admits this is a laudable goal, it blithely concludes that since individual shareholders have not shown much interest of doing so in the past, there’s no point trying to encourage them to do so in the future — a perfect example of circular, self-fulfilling logic.

To add insult to injury, the article then maintains that retail investors”“aren’t steeped enough in the issues to make an informed decision.” That attitude parallels the perspective of mega money managers that they, and they alone, are informed enough to decide what is best for companies.

In making this argument, the real motivation behind the article becomes transparent, namely that anything empowering individual shareholders undermines money managers, and with it, their clout to drive big-picture change. Viewed from that perspective, the piece is not objective journalism, nor for that matter a scoop about the involvement of hidden “business groups” in our campaign. It is thinly-veiled advocacy for the special interests of the chosen few over the rights of individual shareholders like me.

The increasing disenfranchisement of retail investors by fund managers is a real and alarming trend that merits serious discussion before it negatively impacts the inherent trust retail investors have in the fiduciary duty of those who manage our money. Reporting like this does nothing to examine the underlying forces at work here and only polarizes an already complex issue. America’s Main Street investors deserve better.

Nan Bauroth is a member of the new Main Street Investor Coalition Advisory Council. Find out more about the Coalition.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.