T.J. Kirkpatrick for The Wall
Chris Cernich, a
director of M&A and proxy-fight research at the ISS offices in
Rockville, Md., on Aug. 26.
Today he is one of the most powerful people on Wall Street, whose
opinion can sway fortunes and scuttle empires.
The 46-year-old is the new head of M&A and proxy-contest research
at proxy-advisory firm Institutional Shareholder Services Inc. For a
mouthful of a title, the job is relatively simple. Mr. Cernich advises
some of the world's biggest institutional shareholders about how to
vote shares on mergers, proxy contests and corporate-governance
The clients—largely mutual funds, insurance companies and
pensions—almost always follow ISS recommendations, largely because
they can't devote resources to the slew of shareholder votes arising
in their portfolios.
That means Mr. Cernich can often represent the crucial swing votes
that decide whether a merger is approved or dissident directors
elected to a company board.
His recommendation will be crucial in the proxy fight at
Barnes & Noble Inc., as well as a merger struggle between Air
Products & Chemicals Inc. and
Many on Wall Street already are wary of the outsize influence of
ISS, which operates from a sterile office park 275 miles from
Manhattan. The appointment of Mr. Cernich has perplexed some of them,
if only because they know so little about him.
"People haven't really seen him in action yet," said Charles
Nathan, co-chair of the corporate-governance task force at law firm
Latham & Watkins. "So we have reason for uncertainty, and we don't
know if things will be the same or done differently at ISS."
Mr. Cernich has taken an unusual route to the heart of Wall Street.
The English major earned a Ph.D. in American literature from the
University of Michigan, authoring a dissertation titled "Salvage Lande:
The Puritan Wilderness and the Preservation of the World."
He then spent five years in Ann Arbor as an art furniture builder
and designer, making custom pieces—such as dining room sets and
desks—for art galleries and private commissions.
"He's in a different world now," said John Knott, a retired English
professor whom Mr. Cernich assisted at the University of Michigan. Mr.
Knott still has some furniture that Mr. Cernich made for him from
trees that fell in Mr. Knott's yard.
He didn't want to do a job as physically grueling as furniture
making for the long term, so Mr. Cernich decided to earn an MBA from
the University of Michigan. From 1999 to 2008, he worked at Ford,
doing financial analysis for minivan projects among other duties. He
eventually rose to become controller of Ford's $9.5 billion
used-vehicle sales division.
"I gained a lot of respect for used-car dealers," Mr. Cernich said.
"They are really shrewd."
After 10 years at Ford, Mr. Cernich started applying for chief
financial officer positions at midsize firms. Meanwhile, a friend of
his sister also passed along his résumé to a small company called
Proxy Governance fills the same role as ISS, providing
recommendations to shareholders for proxy fights and merger proposals,
but it generally carries less influence.
In his final months at Ford, Mr. Cernich could wear business-casual
clothing. But a senior colleague pulled him aside and reminded him to
wear a tie. Mr. Cernich's response was to buy ties in obnoxious neon
colors, he recalled.
Mr. Cernich's writing skills and ability to read a balance sheet
were key to getting the job at McLean, Va.-based Proxy Governance.
During the busy proxy season, Mr. Cernich typically worked seven
days a week, sleeping only from midnight to 5 a.m.
After about two years on the job, he got a call. It was Christopher
Young, a competitor at the more influential ISS. Mr. Young was
preparing to leave ISS and thought that Mr. Cernich would be a good
choice, partly because he could transition quickly.
The handoff, in June, has worried some in Wall Street's tight-knit
club of deal makers and lawyers. Mr. Young was largely one of them,
having worked as a lawyer at Sullivan & Cromwell and a banker at Bear
Stearns. Mr. Cernich wasn't.
"When you have a Ph.D. focusing on Puritanical literature, you
obviously don't care what people think of you," Mr. Cernich said.
For all his differences, Mr. Cernich said his approach won't be a
radical change from Mr. Young. He will do what is in the best interest
of shareholders, he said.
That means looking at the basics of any merger situation—income
statements, balance sheets, management track record and the background
of director nominees.
He noted that companies that have lost proxy fights often lack
understanding of their investors. At the same time, boards and firm
management don't always get the credit they deserve, he said.
For example, he said he had sympathy for
Prudential PLC management after the company's shareholders
scuttled a $35.5 billion bid to take over
American International Group Inc.'s Asian life-insurance unit.
"Anybody expecting me to be management-friendly or
dissident-friendly will be surprised," said Mr. Cernich, who is single
and one of seven children. "We're shareholder-friendly."
Mr. Cernich said his experience working at Ford does help him to
see both sides of a situation. For much of his time there, the company
was seen as the weakest among the Big Three auto makers. He said he
learned to have a "built-in shock-proof s— detector," to borrow a
quote from Ernest Hemingway. "I've been inside a company that
desperately needed to change and saw the challenges to that," he said.
Mr. Cernich said he also is aware of the accusations that ISS is
too powerful. Its recommendations played a key role in the major proxy
fights of the past several years, including investor
Nelson Peltz's fierce, and successful, battle to get two directors
onto the board of
H.J. Heinz Co. in 2006.
The Securities and Exchange Commission, as part of its review of
the proxy system, is considering whether firms like ISS need to be
regulated over potential conflicts of interest.
"We are not concerned about being the evil empire, but we know
there is that concern externally," Mr. Cernich said. "We are focused
on our responsibilities and we are not in the role of being
Mr. Cernich said he doesn't think he has changed much since joining
ISS. But there have been some alterations. After his first meeting in
New York with clients, bankers and lawyers, an ISS colleague told him
he should only wear white dress shirts.
"I was wearing blue or yellow shirts, so not anything crazy. But
apparently white is the least offensive," Mr. Cernich said. "So that's
my New York uniform now."
Write to Gina Chon at