This chapter looks at the rise of proxy advisors and their influence over corporate governance arrangements. It examines the evidence that proxy advisors: (1) create deeply flawed voting guidelines; (2) promote governance practices that are ineffective or produce adverse corporate outcomes; (3) base their advice on assumptions that do not hold up under scrutiny; (4) adopt voting policies that necessarily occasionally generate perverse outcomes; (5) make mistakes; (6) refuse to correct mistakes; (7) cause their clients to vote in ways that contradict those clients’ own opinions; and (8) are not held accountable by their institutional shareholder clients.

The modern governance regime claims to be able to “count” corporate governance best practices and calculate the relative governance quality of disparate companies. Companies expend resources to achieve high governance rankings in the various ratings schemes published by proxy advisors, governance bodies, and media outlets. However, empirical evidence shows no correlation between governance scores and firm performance. Both academic and commercial governance ratings schemes measure only noise.

I argue that none of the current explanations of why shareholders should be given voting powers are persuasive. I then explain the exercise of informal power through the exertion of influence.

I address the doctrinal and policy objections to my arguments