Today, National Association of Manufacturers (NAM) President and CEO Jay Timmons and U.S. Chamber of Commerce President and CEO Tom Donohue published a joint open letter calling for reforms to the proxy advisory system.
The letter, published in The Wall Street Journal, The Washington Post, The Hill and Politico, outlines the impact that proxy advisory firms have on publicly traded businesses and Main Street investors. Proxy advisory firms make recommendations and often automatically cast votes on behalf of intermediaries that hold shares of stock for American workers and retirees. These votes represent Main Street investors’ voice in corporate elections and on important company decisions. But proxy advisory firms operate without transparency and can provide advice that contains errors and is tainted by conflicts of interest.
The letter calls for reform in advance of tomorrow’s Securities and Exchange Commission (SEC) roundtable on the proxy process. The two organizations also recently launched a major initiative to educate Main Street investors in 401(k)s and pension plans on the dangers proxy advisory firms pose to their retirement savings.
This joint effort follows the NAM’s submission of technical comments to the SEC advocating oversight of proxy advisory firms.
Next Thursday, November 15, the Securities and Exchange Commission (SEC) will hold a roundtable on the proxy process. This is an opportunity for the SEC to solicit input from a variety of stakeholders on whether proxy advisory firms work in the best interest of Main Street investors. The roundtable is a critical step in the review process to determine if reforms to the existing rules are necessary to protect Americans’ retirement accounts.
Ahead of the roundtable, the National Association of Manufacturers (NAM) and the U.S. Chamber of Commerce have launched a major initiative to educate Main Street investors in 401(k)s and pension plans on the dangers posed by proxy advisory firms. A digital and print campaign, backed by a significant six-figure investment in print and social media ads, aims to ensure that retirees and those saving for retirement have their voices heard on this serious threat to their futures.
The retirement income of millions of Americans and the performance of the public companies in which they’ve invested their savings are affected by a little-known but powerful group of firms whose influence is gaining overdue attention. Proxy advisers provide recommendations on shareholder proposals despite having little regulatory oversight, and two companies, Institutional Shareholder Services and Glass-Lewis, control about 97 percent of the proxy advisory market. These firms lack oversight and can provide bad advice, based on inaccurate numbers or politically motivated agendas, that impacts your retirement savings.
It’s critical that hardworking Americans understand how their retirement savings are being put at risk by largely unregulated entities that operate with little transparency and provide advice that can be tainted by conflicts of interest. The business community has long advocated commonsense corporate governance reforms, including greater oversight of proxy advisory firms. These ads are indicative of the significance with which manufacturers view this issue. The NAM has also submitted a formal comment letter to the SEC outlining our proposed reforms.
The U.S. Chamber Center for Capital Markets Competitiveness (CCMC) recently issued two reports examining how the influence of proxy advisers continues to place undue challenges on businesses and investors. Its 2018 proxy season survey found a minority of companies believe advisory firms adequately researched issues on which they issued advice. And its examination of so-called “zombie” proposals showed the toll that repetitive, failing proposals—often supported by proxy advisers—take on companies and their shareholders.
The ad campaign will help those most threatened by the growing power of proxy advisers to learn more and have their voices heard. Ad samples and additional information can be found at www.proxyreforms.com.
“Evans is headed for a stronger business year and hiring new workers to satisfy increasing demand.”
“Huntington Ingalls Industries—the largest military shipbuilder in the United States—is planning a “generational” investment in their business and their employees.”