Two of the members of the Shareholder Communications Coalition — the Society of Corporate Secretaries & Governance Professionals and the National Investor Relations Institute — have developed a Discussion Draft on Proxy Advisory Services, to help policymakers and regulators in their review and evaluation of the proxy voting systems. The Discussion Draft presents recommendations for improving the regulatory oversight and transparency of proxy advisory firms, as a starting point for policy deliberations on these issues. Proxy Advisory Services: The Need for More Regulatory Oversight and Transparency can be downloaded as a pdf. Recommendations include the following:
- Regulatory Oversight of the Proxy Advisory Industry.
- Public Disclosure of the Proxy Governance Models Used by Advisory Firms.
- More Robust Due Diligence Regarding Proxy Vote Recommendations.
- Public Disclosure of Proxy Voting Recommendations and Decisions.
- Public Company Input into Advisory Recommendations.
- Public Disclosure of Voting Errors.
The draft is certainly worth discussion. I’m especially fond of the recommendation that “All institutional investors using proxy advisory services-including pension funds, hedge funds, and private equity funds-should publicly disclose the actual proxy votes cast by them (or on their behalf), if they are not already disclosing their voting records.”
While I think that this discussion draft makes some valid points in regard to regulating proxy voting advisers and forcing disclosure of errors, I am concerned that this initiative is overreaching by the issuers, i.e. public companies. At the outset, the Discussion Draft proposes to regulate anybody that has an opinion about corporate governance in the context of specific company meetings. Suggesting that CtW Investment Group, an organization that takes a leadership role in corporate governance matters should be regulated is ironic given the massive expansion of corporate free speech post-Citizens United. The logical extension of this argument would put any organization (environmental groups, human rights organizations, religious advocates, political groups) at risk for voicing an opinion about any public company.
As Rep. John Boehner says, “Let’s start over!”