Senator Heidi Heitkamp (D-ND), who is up for reelection this year, addressed the proxy advisory firm issue, citing "the flaws in the current system" and noting “no one benefits when advice is not vetted or accurate.” She also stated that she believes a mutual solution to the problem could be found. “It seems obvious that a firm which overwhelmingly dictates how investors vote should not also be pitching companies on how to improve their corporate governance results,” said Senator Scott in discussing how ISS’s consulting arm provides advice on proxy proposals on which ISS Research later provides recommendations.
The House bill creates a “separate and punitive regulatory regime which aims to make [proxy advisory firms] disloyal to their clients,” replied Damon Silvers, AFL-CIO Policy Director and Special Counsel. Silvers was responding to questions from Ranking Member Sherrod Brown (D-OH) who himself criticized the legislation as creating “structural obstacles for investors to hold corporate managers accountable.”
Sen. Thom Tillis (R-NC) also suggested the SEC should revoke two “No-Action” letters which allow investors to rely on proxy advisory firms as independent third-party experts. This approach could be implemented by the SEC without action by Congress.
In advance of the hearing, the Center On Executive Compensation joined in submitting a letter in support of H.R. 4015 as a model for Senate proxy advisory firm legislation to the Senate Banking Committee. The Center is further working on securing support for such legislation in the Senate.