SOURCE: Society of Corporate Secretaries & Governance Professionals

Society of Corporate Secretaries & Governance Professionals

June 01, 2016 09:55 ET

Society of Corporate Secretaries & Governance Professionals and National Investor Relations Institute (NIRI) Support Passage of Proxy Advisory Reform Act of 2016

Society and NIRI Also Urge Members of the House Committee on Financial Services to Request SEC Action to Modernize and Update Its Proxy Rules

NEW YORK, NY--(Marketwired - Jun 1, 2016) - The Society of Corporate Secretaries & Governance Professionals and the National Investor Relations Institute (NIRI), together representing 1,800 public companies, submitted a statement last week in support of the passage of the Proxy Advisory Reform Act of 2016, a bill proposed by U.S. Representatives Sean Duffy (R-WI) and John Carney (D-DE). The statement cited a number of reasons for their support, including:

  • Proxy advisory firms exert undue influence in the proxy voting process and operate without providing adequate transparency.
  • They have developed policies without meaningful input from companies which are "one size fits all" and in some cases can be destructive of shareholder value.
  • They are not required to abide by the proxy solicitation rules that apply to other proxy participants.
  • Proxy advisory firms should be registered under the securities laws and subject to oversight by the SEC.
  • Proxy advisory firms should provide each public company with a copy of its draft report, in advance of dissemination to their clients, so that a company can review and correct any inaccurate financial information.
  • Conflicts of interest need to be addressed. One of the largest firms provides both corporate governance and executive compensation consulting services to public companies, in addition to providing voting recommendations to its institutional clients on each item on a company's proxy. These conflicts should be specifically disclosed on all proxy firm reports so that proxy advisory firm clients may evaluate this information in the context of each firm's voting recommendations.

Commenting on the Society-NIRI statement, Darla Stuckey, President of the Society, said, "Proxy advisory firms exist due to the unintended consequences of a DOL letter and SEC rules in 2003 requiring investment advisers and mutual funds to disclose their voting policies. While outsourcing to proxy advisory firms is pragmatic and rational on the part of institutional investors, given their large number of holdings, the firms now have more voting power than the largest investor at most companies. Society members believe that the Proxy Advisory Reform Act of 2016 addresses many of the concerns raised by public companies and other participants in the U.S. proxy system over the last several years. We support this bill and also urge the members of the subcommittee to request the SEC to take further action on the 2010 Concept Release on the proxy voting system."

About The Society of Corporate Secretaries & Governance Professionals:
Founded in 1946, The Society of Corporate Secretaries & Governance Professionals, Inc., is dedicated to providing members the knowledge, skills and tools to promote effective governance to benefit boards, management and shareholders. To learn more visit www.governanceprofessionals.org.

The full statement is available on the Society website.

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