Proxy season brings market manipulation into focus


Amid growing concern about market manipulation by investors (hedge funds are most often cited), investors and businesses must now focus on proxy season and ways to prevent the effects of market manipulation from carrying over there. There is concern that funds will be able to sway elections by voting shares they don't own, or have to hedge to minimize their economic stake in the outcome.

For example, if a fund owned 100,000 shares of a company but had purchased put options, the actual exposure might be far less than the 100,000 shares would indicate. Yet they would still be able to vote those shares. This is of tremendous concern as a corporate governance issue, because it could be that many corporations will now be run by two groups: management with little stake in the company, and hedge funds with little stake in the company.

Gordon Gekko would not be pleased.

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Last updated: February 13, 2012: 11:13 AM

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