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The SEC’s Long Approach to Proxy Reform

Job Title: Executive Vice President

Current Employer: Center for Capital Markets Competitiveness


Despite the current COVID-19 crisis, it is important for regulatory agencies to continue addressing issues harmful to the economy, such as proxy advisory firm and shareholder proposal reforms. These reforms lack of oversight and their modernized rules have created disincentives for businesses to go public. In turn, this has harmed U.S. competitiveness in a global economy.

The Securities and Exchange Commission (SEC) has been considering these issues and soliciting input for the past 10 years, dating back to its concept release on the U.S. proxy system in 2010. The SEC held a roundtable in 2013 on proxy issues, which led to them issuing guidance in 2014 clarifying responsibilities of investment advisers that rely on proxy advisory firms. Since then, Congress stepped in and actively considered reforms and changes to the proxy system by holding numerous corporate governance hearings in both the House and the Senate, where I had the honor of testifying. Congress also introduced and advanced bipartisan legislation bringing proxy advisory firms under greater regulatory oversight.
Ultimately, over the past two years the SEC again started a public comment process on these issues by holding a proxy roundtable in November 2018, which I participated in with other stakeholders in Finally, the SEC issued a proposed rule on proxy advisory firm and shareholder proposal reform in November 2019, and the U.S. Chamber (Proxy Advisory Firm Reform and Shareholder Proposal Reform) and others submitted extensive comments on both proposals.

The 2019 proxy advisory firm reform proposal laid out a very well-thought out process that would help reduce errors and mistakes in proxy advisory firm reports, increase transparency in methodologies and sources of information to produce vote recommendations, and would impose liability on proxy advisory firms for making false and misleading statements. Additionally, the proposal contemplated a number of other reasonable alternatives and other areas of interest, which Commissioner Roisman indicated they are looking into.

Throughout this process and over a long period of time, the SEC has demonstrated a thoughtful and extensive approach to consider proxy and shareholder reform issues, which has led to the SEC November 2019 proposal that would ensure long-term value for main street investors is considered. It is time for the SEC to move forward on this rulemaking and help companies and investors look towards the future.

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