Last month, the Securities and Exchange Commission (SEC) held a roundtable on the proxy process to discuss important proxy issues that impact public companies and their investors. On Thursday, the Senate Banking Committee followed suit, holding a hearing titled Proxy Process and Rules: Examining Current Practices and Potential Changes. (Watch the hearing video here.)
A key discussion item at today’s hearing was the role of proxy advisory firms. These firms provide advice to the investment managers that oversee middle-class Americans’ pensions and 401(k)s, but proxy firm recommendations have been shown to contain errors and can be tainted by conflicts of interest. In a letter to the Banking Committee, the National Association of Manufacturers (NAM) argued that targeted reforms are needed to reduce proxy firms’ influence and allow investors to make informed proxy voting decisions. The NAM also applauded the Banking Committee for their attention to this critical issue.
There is bipartisan interest in Congress in reining in proxy firms and protecting Main Street investors’ retirement savings:
- Last year, the House of Representatives passed the Corporate Governance Reform and Transparency Act (H.R. 4015), sponsored by Reps. Sean Duffy (R-WI) and Gregory Meeks (D-NY), which would require proxy firms to meet certain standards related to errors, issuer engagement and conflicts of interest.
- In November, Sens. Jack Reed (D-RI), David Perdue (R-GA), Heidi Heitkamp (D-ND), Thom Tillis (R-NC), Doug Jones (D-AL) and John Kennedy (R-LA) introduced the Corporate Governance Fairness Act (S. 3614), which would set up an examination process for the SEC to inspect the firms and check for policies to address conflicts of interest and material errors or misstatements.
The NAM believes that Congress and the SEC must take steps to bring oversight and reform to the proxy firm industry.
The NAM continues to engage with policymakers on the importance of proxy firm oversight and reform. Today’s letter builds on our aggressive advocacy campaign leading up to the November SEC roundtable, which included a six-figure ad buy and a technical comment letter that provided policy solutions for the proxy issues impacting manufacturers.
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