Large institutional investors help Americans invest for retirement by managing their life savings and making proxy voting decisions on behalf of the millions of Americans with shares in a mutual fund, 401(k) or pension plan. Yet, these fund managers, duty-bound to act in middle-class Americans’ best interests, have instead been relying on unregulated, conflicted “proxy advisory firms” to shape these important decisions.
In a new comment letter submitted to the Securities and Exchange Commission (SEC) this week, the National Association of Manufacturers lays out the many flaws intrinsic to the proxy advisory firm business model and urges the SEC to take action to ensure that investment managers are acting in Main Street investors’ best interests when making proxy voting decisions.
Proxy firms have expanded their influence in recent years, and they are not shy about using their power to impact public company decision-making. Yet, their one-size-fits-all view of the world does not always align with what is best for manufacturers or Main Street investors, and their recommendations to investment managers are often riddled with errors and conflicts of interest.
The SEC is hosting a roundtable on the proxy process in November, and a key discussion item will be the role that proxy firms play in the marketplace given the outsized influence these firms have on company decisions that impact the savings in millions of Main Street investors’ retirement accounts. In our comment letter, we call for targeted reforms that would allow proxy firms to continue to provide advice to investment managers—but under increased oversight from the SEC and improved due diligence from institutional investors.
By taking concrete action to address these important issues, the SEC can ensure that investment managers, proxy firms and public companies alike remain exclusively focused on delivering returns for middle-class Americans investing for a child’s education, a new home or a secure retirement.
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- SEC Withdraws Proxy Firm No-Action Letters - September 18, 2018