Urging the Securities and Exchange Commission to act on proxy advisory firms and shareholder proposals, hundreds of major public companies joined the Nasdaq in petitioning the SEC in a comment letter submitted last week. The letter highlights the importance of the proxy process, but notes that currently it is a “poorly-calibrated regulatory ecosystem” which has contributed to the reduction in the number of public companies. The letter makes several general recommendations for the SEC to address proxy process topics including both proxy advisory firms and shareholder proposal issues. With regard to proxy advisors, the Nasdaq letter urges the SEC to “adopt strong protections for both companies and users of proxy advisory services to ensure that conflicts of interest are eliminated where possible, minimized and/or mitigated where appropriate, and transparent to the users and subjects of reports.” The letter also asks for the SEC to investigate concerns about proxy advisory firm accuracy and policy creation. On shareholder proposals, the letter request the SEC to increase the resubmission thresholds so that proponents must receive 6% support after the first year in order to resubmit the proposal, 15% after the second year, and 30 percent after the third, from the current 3 percent/6 percent/10 percent standard.
Meanwhile, at the SEC’s February 6th Investor Advisory Committee, SEC Chair Jay Clayton announced that Republican Commissioner Elad Roisman would lead the SEC’s efforts to “improve the proxy voting process and infrastructure.” In a statement referencing remakrs also given to the Investor Advisory Committee on February 6, Roisman thanked Chair Clayton for the opportunity and called the proxy plumbing system “inefficient, opaque, and unreliable in its accuracy”. Roisman also specifically called out concerns about proxy advisory firms and asset manager voting practices and indicated that "important for us to study and address these issues, as appropriate."