Bowyer Research first came to the attention of IR Impact – and many on the mainstream governance scene – when the firm’s ESG-skeptic voting policies were picked up by ISS. Today, those policies are available through all the major proxy voting advisory firms and Bowyer Research, which is essentially a mom-and-pop (plus kids) shop run out of Pennsylvania, advises many millions of dollars, including the $57 bn Texas Permanent School Fund.
Jerry Bowyer, who co-founded the firm with wife Susan, feels the right is playing catch up when it comes to equities and proxy voting – a sentiment shared byRobert Eccles, the ex-hippy that has found common ground with the so-called eco-right. The Bowyer family are now on a mission to get the right to move away from divestment and into engagement and the power of proxy voting.
Jerry Bowyer, co-founded Bowyer Research with Susan, his wife of 31 years
Here, Bowyer tells IR Impact about how the family got into the voting scene, shares insights into some of the trends worrying him on the fringe Christian right and talks about themes like debanking, an issue thrust back into the spotlight in recent weeks withUS President Donald Trump’s lawsuit against JPMorgan and its CEO Jamie Dimon.
Tell me a bit about how you – and your family – got into this.
Well Susan is here with me, because we do all this together. She’s just off camera listening in with our granddaughter because Friday is grandkid day.
How did we get into this? Well, I am a financial economist and Bowyer Research was – and still is – doing work on building smart-beta ETFs. We’ve always been involved with the money allocation side.
But around 2018-2019 I started to get concerned with what I saw as mission draft in corporate America: CEOs thinking of themselves as political actors or saviors of the oppressed – things very much outside of their skill set.A CEO is there to do one thing – run a company. Not because the other things aren’t important, but because CEOs aren’t good at that and it’s just not the job of bankers to save the world.
So, I started to dig into it. I had a client considering a move from Glass Lewis to ISS but, looking at voting patterns, I didn’t think their point of view – largely religious, conservative – was being reflected. I also questioned whether these votes were good for the companies and what they meant for an asset managers’ obligation. So Susan and I threw ourselves into it.
Where do you stand on the current debate around the big proxy voting advisors?
Glass Lewis and ISS are extremely influential. We’ve been trying to educate people about why proxy advisory services matter for corporate America. They matter because corporations are so incredibly influential, they matter for politics and for culture – things that really affect people’s lives. Now that the topic is above the fold in the newspaper, everyone’s got an opinion and there is a certain outrage about the proxy advisory business. Working with some of the parties that took issue with ISS and Glass Lewis voting policies from an ESG-skeptic perspective, I was surprised to find out how much the left hates them too, because they feel like they aren’t going far enough.
But there is no denying the influence they have – even in ‘custom’ policies, which are rarely built from the ground up and are instead based on an existing policy that might change around a few specific issues. You can see the influence in the numbers: I’ll see a proposal that last year got 40 percent support and this year got 9 percent. What changed? The proxy advisory services stopped supporting that category of proposal. Their endorsement really does make a difference.
From my point of view though, I feel like the administration trying to enact reforms doesn’t have a strong sense of the mechanics of how this works and what the effects might be. So I’ve urged those in positions of making political or regulatory decisions to talk to people who have some of the grease of proxy statements under their fingernails in order to better understand the nuances.
What would good reform look like to you?
I think the fundamental problem is that asset managers’ main skillset is allocation of capital. They know how to execute investment decisions. They do not have the skillset of proxy voting. They have skin in the game – incentive, fiduciary duty, accountability – but they don’t have expertise.
The proxy advisory services really do have that expertise, but they don’t have skin in the game. They’re not investors, they’re not owners and they do not have clear fiduciary obligations. This is a structural issue and I think there could be a market solution. I’m not looking for big-government solutions.
Your own‘ESG-skeptic’ policy is now available to clients of major proxy voting advisory services, which began with ISS. How did that come about?
I had two avenues of discussion with ISS, one via a client we were creating a custom policy for. During that process, I also talked to them about their benchmark policies, which I care about because I’m a citizen and to me, these things don’t make sense. Surely you don’t think that companies should divest from Texas because it hasa ‘heartbeat Bill‘? That’s going to cause a worker shortage – plus people are flocking to Texas for work, not the other way around.
But then on a completely different track, I’d been making some comments on LinkedIn about ISS and Glass Lewis. I said something that wasn’t defensible and the ISS comms guy reached out to me to say it wasn’t accurate. I agreed and changed it and that really started an engagement, which became a relationship and a friendship – even if some of the positions we take are sometimes a strain.
Then, I began talking to some of the Red State treasurers who were doing anti-ESG and anti-DEI press conferences and op eds. They were saying all this but when I looked, they were still voting with ESG and DEI – they didn’t even know it. They wanted to write yet another angry letter but I said,Well, why don’t we just create guidelines for you?We wrote these guidelines in the interest of a Red State fiduciary entity – and the rest is history.
You’re a Christian. How does religion come into this?
At the time we got interested in all this, there had been a raging debate among Christian investors in America and Kingdom Advisors, which is the big, professional association of Christian financial professionals. This was all about how much you have to screen out in order to be righteous. Some themes – like tobacco – are things the left and the right can agree on. Other questions might have been around whether you are screening out enough companies that have a pride day. Kingdom Advisors asked me what I thought.
My opinion was that it was all a little Pharisaical. The Jesus model is not that you shun but that you sit down and eat with tax collectors and prostitutes. You don’t express your righteousness with a list of who you won’t associate with. That conversation around screening has become one of open conversation.
What do you do when a company is doing something that’s contrary to your values and contrary to their interests? You talk to the companies. And the first way you talk to a company is by voting.
That’s very similar to the debate around divesting from fossil fuels versus buying and engaging.
It is. This is something that the worshipers of Jesus and the worshipers of Gaia have in common: a sense of a jealous god who is going to smite thee for associating with the wrong people.
What happened with the anti-fossil fuel people is that they figured out a lot earlier that owning is more powerful than divesting and they leaned into the investment side. Conservative Christians have historically had an aversion to that and I see it in the comment sections:Disney did something, oh, I’m going to sell the stock.What we’ve found is that reasoning can be extremely effective.
I also wanted to ask you about being a Christian and fiduciary duty. Are those things ever are at odds?
I don’t see how they can be, because fiduciary duty is an idea ultimately derived from the Christian faith. In Second Corinthians, Paul says it is required of a steward that they be found faithful. Fiduciary duty is essentially a biblical idea and a moral principle.
What about moral principles from a social perspective? Where do those fit in?
They are part of it, but through a different avenue. They should, in my opinion, be addressed through the legislative process and through public discussions.
I don’t think it’s morally legitimate to hijack an ownership structure system to impose your values on a company – and that includes my values. One of the Red States asked me about this last year, about my religious views and how they affect the proxy voting process. I would say it effects affect my voting, in that my Christian imperative is not to use force or manipulation to impose my views. Our job is to represent the financial, pecuniary interests of the shareholders we work with.
Now, if a company profits by doing something that’s purely evil and you run into a conflict, I think the honorable thing to do is to abstain, absent or resign. But I haven’t seen that yet, because, again, I think fiduciary interest and religious obligation are in harmony with one another.
When it comes to support for anti-ESG proposals, we often see a low level of support. How much does that matter?
Voter support isn’t nothing, but it certainly isn’t everything – or even the most important thing. The first thing I think when I look at those low percentages, is that there are presidential elections in strongman republics that might see the same stats. If you see an election in a free state that’s got 98 percent support, do you think,Wow, what a glorious leader they must have. Or do you think,Wow, that system is really rigged.
It’s not as though we’re out there saying,Hey, here’s our puppy-killing proposal. These proposals are:Let’s not give puberty blockers to kids. Let’s look at the financial payoff of legally risky, ethnicity-based targets for employment or suppliers.Is anyone seriously arguing that? No, 98 percent of shareholders don’t care about that at all. The shareholders never read that. It’s asset managers who are aggregating and robo-voting.
Proxy advisory services offer zero support for those kinds of proposals – or pretty much anything from the conservative coalition – except on issues like a separate CEO and chair for example.
The other thing that happens is that Blue States are on top of it and they don’t vote for those proposals because they don’t like them. At the same time, Red States are largely not paying attention yet. Some of the Red State treasurers have been convinced that they have their solution already, which is to just vote board aligned. Take a proposal to get the board to roll back ESG and DEI policies: the ESG people vote against it because they don’t want to roll back but the conservatives also vote against it because they have, in my opinion, unwisely taken the position of always agreeing with management. That’s how you get a 2 percent support level.
But we don’t sweat it because we’re having lots of great conversations and companies are doing the reasonable things we’re asking at very high rates, so we’re able to withdraw a lot of proposals.
If these proposals were so terrible, if they were such fringe issues, why are so many companies now engaging and making change? If we do proposals about debanking and debanking isn’t a thing, then why are companies changing their debanking policy?
Although you’re known for your ESG-skeptic approach, you also describe yourself as supportive of first-wave feminism. Tell us more.
I think it’s a good thing for companies to have women on boards. Good for the companies and in no conflict with my religion. The first thing said about women in the Bible is that it’s not good for men to be alone. If there should be a woman in the household, why doesn’t that apply to boardrooms?
First-wave feminism, in the American context, is about women owning property, women voting – and it came very much out of the Christian tradition.
As a conservative Christian, I believe that women and men are different from one another. I think that they have a different orientation towards the world – which means that you need them both. An institution or company that erases 50 percent of the human race has hobbled itself morally, emotionally and strategically.
Companies that don’t have any women on the board underperform their peer group. The suggestion in the data is that if you’ve got an all-boys club company, you’ll do a little better in the bubble phase. But when the bubble bursts, you give all that back and more. It can’t all be testosterone, cowboy, rocket-ship stuff.
Yet unbelievably, there is currently an active debate in America’s conservative circles about whether the 19th Amendment, which gave women the vote, should be rescinded. That is shocking for me and I’m flummoxed by that. A lot of it is a reaction against feminism. You’ve got a lot of young men who are career underachievers and there are women who are not – and who are not in the marriage market for those underachieving men. So the men grow a really big beard, adopt a Latin name on Twitter and go out there and say women should never have been given the vote or shouldn’t be in the workplace. It’s kind of a loser narrative and it’s not in the Christian tradition, where men and women are both created in the image of God. In fact, I would argue that we’re most in his image when we are together in an interaction or partnership – and that includes in the boardroom.
Are there other themes that might surprise people through your support?
One is adjacent to this topic: sexual harassment, abuse and NDAs in the workplace. If you’re sweeping that under the rug or you’re paying women off, having them sign an NDA, then we are strongly opposed to that, because it’s going to come out eventually and, by doing these things, you’re not fixing the culture.
It might also surprise people how fiduciary our argument is against abortion. We run a net-present-value on the purchases for a baby, toddler and child over the first 10 years of life. We’re not making the moral case but we are saying,If you are in the baby product segment and abortion rates go up, you’re going to sell less. In fact,Toys R Us, which supported abortion, did go bankrupt – in which it cited downward fertility rates.
Then, there have been a number of proposals from conservative groups that we have recommendedagainstbecause they mandated fossil fuel use. They saiduse fossil fuels because it’s good for the national economy, rather thanuse fossil fuels if it’s profitable.
Another example would be proposals that seek to pressure companies to divest from China – but they make a foreign-policy case, rather than an intellectual-property or business-decoupling case. My answer to those proposals is that already have a Secretary of State. We already have a Secretary of Defense, now the Secretary of War… we don’t need shareholder proposals as a foreign policy regime.
Do you get trolled?
Yeah. I certainly got some stuff aftersupporting the Tesla proposal.
Does it bother you?
No, no, no. It means we’re effective. Not that I like it if somebody lashes out on social media or email – that hate harms their soul and I don’t like to see that, but it doesn’t get to me emotionally.
You founded Bowyer Research with your wife, Susan, and some of your children also work at the firm. As a family run company dealing with the likes of ISS and Glass Lewis, are you surprised by the success?
I met Susan in college, which was 400 miles from where I grew up – but we think we first met in Sunday school, because her grandfather preached as a Methodist minister in the town I was born in. We then met again 20-some years later, 400 miles away in Pittsburgh. We’ve been married 31 years and we’re looking forward to another 31 more.
We really are co-founders and I can’t imagine doing it without her. We built this together. We put in late nights, building proxy voting guidelines, when we had no idea there would be a business.And yes, it has certainly exceeded my expectations – I know it is unusual.
There are times I’ve been askedWhy are you bringing your wife to this meeting with a $30 bn pension fund?Because I need her. And because she did as much work as I did. So why shouldn’t she get recognition? There are lots of businesses where the woman is doing the work while the man gets the glory. The way to normalize women’s success is to lean in, smile and wave.