The California Public Employees’ Retirement System (CalPERS) and the New York City Comptroller’s Office both continue to use a deeply flawed CFA Institute report as support for their advocacy of proxy access, the ability of shareholders to have their own slates of nominees to corporate boards included in the proxy materials companies must distribute ahead of their annual meetings.

As R.J. Lehmann and I discuss in our recent op-ed in RealClearMarkets, which was republished in the Oxford Business Law Blog, the importance of the CFA Institute report in the debate over proxy access can’t be overstated. Shareholder proposals on proxy access typically have included a supporting statement noting the CFA Institute’s finding that mandatory proxy access could raise overall U.S. market capitalization by up to $140.3 billion, if it were adopted market-wide.

However, as I tried to make abundantly clear in a recent policy brief for R Street, the report is “deeply flawed in ways that should disqualify its use as support for mandatory proxy access; for shareholder proposals on proxy access; for board discussions about whether a proxy-access bylaw should be implemented; and, perhaps most importantly, for board discussions about whether a proxy-access bylaw needs to be rescinded.”

In sum, “the report is full of errors, contradictions and practices of questionable methodology.” These flaws are especially relevant in regard to the $140.3 billion market value calculation, a number that should be totally disregarded by shareholders.

Nevertheless, the CFA Institute report continues to be used by those in the shareholder-empowerment movement (shareholder activists who advocate shifting decision-making authority to themselves, and away from corporate boards of directors and executive management) as support for implementing proxy access on a company-by-company basis.

Most importantly, its continued use reinforces the argument made in our op-ed piece: “The report’s persistent use by those in the shareholder-empowerment movement suggests either that some in the movement are intellectually dishonest or that they are, at the least, reckless in their arguments.”

It also reinforces the argument that the shareholder-empowerment movement does more harm than good and that the activities of those who participate in the movement should be viewed with great suspicion.

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