SEC Comment Letters on Proxy Plumbing

Worth Reading … SEC Comment Letters on Proxy Plumbing | Governance Center Blog. Gary Larkin, writing for the Conference Board, points to several comment letters worth reading. I’m pleased to have my letter among those listed. I’ve greatly abbreviated Larkin’s list and added a few nominees.

  • The Corporate Governance Network, James McRitchie, Publisher, Oct. 20. Excerpt: The issue of blank votes was previously discussed in my May 15, 2009 petition to the SEC to amend Rule 14a-4(b)(1)… In this section I address the need for Voting Instruction Forms (VIFs) to meet the same standards as proxies… Broadridge’s appears to fall short of full compliance with SEC regulations with regard to notifying the voter being solicited as to how blank votes are counted.
  • Wachtell, Lipton, Rosen & Katz, Oct. 19, Excerpt: …The prevalence of empty voting, and the increasingly sophisticated and manipulative ways in which it is employed, risks allowing voters who are not economically aligned with a corporation and its economic shareholders to subvert the corporate machinery to the detriment of those shareholders, the corporations that they own and, ultimately, the American economy…. The singular role that proxy advisory firms play in the field of corporate governance and elections, and the broad reach of their influence, calls for comprehensive and particularized regulation by the Commission for the protection of all investors…
  • The Corporate Library, Nell Minow, Chair, Oct.19. Excerpt: …. I would support the UK approach of putting the burden of proof on institutional investors to show why they have not been actively engaged in exercising those rights, and I would support a vigorous enforcement program to address the issues of conflicts of interest we have documented in the repeated failure of institutional investors to vote against value-destroying compensation plans (even when proxy advisory services tell them to do so).
  • Center for Capital Markets Competitiveness (part of the U.S. Chamber of Commerce), Tom Quaadman, Vice President, Nov. 15. Excerpt: …we recommend that the CCMC and ISS develop standards that would set forth a formal process that ISS would observe to formulate and update its corporate governance policies.
  • National Association of Corporate Directors, Barbara Franklin, Chair; Kenneth Daly, President and CEO. Oct. 20. Excerpt: …New technologies and social media are changing the way boards garner information and sentiment from shareholders. Companies can do more to use technology in board-shareholder communications…. We do not believe that, for the most part, proxy advisory firms need additional regulation. However, if companies vote shares on behalf of owners, they should register as investment advisors.
  • Lawndale Capital Management, Andrew Shapiro. October 25. Excerpt: …Confidentiality is necessary to allow objective voting to take place and not interfere with the legitimate flow of investment due diligence interaction that would come from retaliatory treatment….changes to the NOBO/OBO regime and other proxy and Section 13 disclosure rules that reduce investor privacy also risk disruptions in the efficient allocation of capital.
  • United States Proxy Exchange (USPX), Glyn Holton. Comment Letter. Excerpt: In an honest election, votes that aren’t cast should remain not cast. You don’t offer those votes up to whomever would like a little extra suffrage: “Unused votes here! Who would like ’em?” That, essentially, is what the post-reconciliation and hybrid methods do, at least as described in the Concept Release. By “recycling” votes other shareowners have chosen not to cast, they boost certain shareowners’ voting power beyond what it would be if individual shares were tracked through clearance and settlement to individual beneficial owners … We do not believe it is a purpose of the Commission to help corporations achieve quorum. If they had more difficulty achieving quorum, corporations might take more effective actions to attract participation by individual investors in the proxy process.
  •, Mark Latham. September 29. Excerpt: …To maximize the benefit to our economy, CDV should be open and free… Competition among proxy advisors is important to ensure that we get value for money. Letting us retail investors allocate collective funds by vote to competing advisors would also ensure loyalty to our interests… OBO should be the default status for all retail investors. NOBO should be by opt-in only. A NOBO default would increase the entrenchment of corporate management. An OBO default would better protect retail investors’ privacy. Issuers should not be able to solicit proxies directly from beneficial owners… management should communicate with shareowners via the public forums created by Open CDV and competitive markets for public advice.

And for a UK perspective, check out US proxy reform: It’s completely broke, please fix it!

In the words of the STA summary “of the 199 original letters submitted, only two expressed a “very negative” opinion on proposed reforms to any of the issues: the American Business Conference, and Broadridge (which stands to gain the most by maintaining the status quo). The implication is clear: the consensus among all stakeholders – from issuers to academics – is that major reforms are badly needed”.

We seem to have found the definitive diametric opposite of the good old maxim ‘if it ain’t broke, don’t fix it’.

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