On July 22, the SEC will host an open meeting to review the finalized text of the proxy advisory reform rules. The Center has strongly supported the SEC’s efforts to modernize these rules and ensure that companies have sufficient opportunity to address inconsistencies, , and errors in proxy advisory firms’ reports which can dramatically impact vote results.
- Through July 9, 2020, the report captured 42 examples of companies filing supplemental proxy materials with the SEC to correct the record following a proxy advisory firm report.
- This represents an increase of approximately 60% over the 2018 totals (the study was not conducted in 2019).
The supplemental filings highlight a key gap in how companies view errors and how proxy advisors defend themselves. The proxy advisory firms claim that most errors are differences in opinion. However, in one case featured in the report, Hecla Mining noted in its proxy statement that its major competitors are almost entirely Canadian companies, but the proxy advisory firm policy does not acknowledge this fact and selected a peer group made entirely of US-based companies.
Overall, the report highlights the importance of the SEC’s proposed rules. By regulating the timeframe to address errors, inaccuracies, and even logical gaps in policy, all companies (not just S&P 500 companies) will have the chance to present the full case to investors. Further, regulation provides certainty, rather than relying on proxy advisory firms’ flexible or “best effort” policies to provide drafts.