SEC Chair Clayton Foreshadows Action on Proxy Process Issues in Senate Hearing
May 11, 2019
This week, in a Senate Appropriations Committee hearing on the SEC’s 2020 fiscal year budget requests, SEC Chairman Jay Clayton outlined the agency’s agenda and priorities, which included a specific mention of the “significant initiative for Corporation and Finance and Investment Management” of improving the proxy process. Clayton’s testimony specifically mentioned three proxy process issues, including (1) the proxy solicitation and voting process; (2) the shareholder proposal process; and (3) proxy advisory firms. Significantly, Mr. Clayton noted the SEC “should act to improve each of these areas” and that he has asked the SEC staff to provide recommendations for the Commission’s consideration.
Mr. Clayton’s testimony also addressed the timing of any proposals, noting that he does not believe any of the identified issues “will improve on their own” and that he intends to move forward with the staff’s recommendation.
Additionally, Senator Van Hollen (D-MD) asked Mr. Clayton about his views on share buybacks. Mr. Clayton stated that the SEC does not regulate buybacks but does look at whether a company executing a buyback does so in compliance with insider trading and market manipulation laws. Mr. Clayton noted somewhat obliquely that he is concerned by the fact that compensation committees might consider the impact to executives' stock-based pay when determining whether or not to conduct a buyback, although he did not characterize whether or to what degree this has been problematic in the past.