On April 25, shareholders of General Electric Company (GE) approved KPMG LLP as the company’s auditor for another year, but only by a margin of 65 percent “for” to 35 percent “against.” According to data from consulting firm Audit Analytics as reported by The Wall Street Journal, this represents “one of the highest levels of shareholder opposition to an auditor at any company in recent years.” To further put the GE vote in context, consider another data point from Audit Analytics: “In more than 15,000 shareholder votes to ratify auditors at public companies from 2013 to 2017, there were only 22 cases, less than 0.2 percent, in which more than 25 percent of shareholders were opposed.”

KPMG has served as GE’s auditor for 109 years and had never received more than token opposition from shareholders. This year, however, the two largest proxy-advisory firms, Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis), took the extremely unusual step of recommending that GE’s shareholders vote against ratification of KPMG. According to this Reuters article, ISS cited “concerns about GE’s previously undisclosed liabilities and accounting practices,” and Glass Lewis cited “concerns about a Securities and Exchange Commission investigation into the company’s accounting practices.”

In its proxy statement, GE touted the benefits of having a long-tenured auditor, such as “institutional knowledge.” But ISS stressed that such benefits must be balanced “against the risk that a long-tenured auditor can become too close to a client, and the potential for a new auditor to uncover problems previously unidentified.”