Comment on the SEC's Proposed Proxy Voting Amendments

Summary of Study

Bottom Line: Nasdaq supports the Commission’s Proposal to require transparency about the methodologies and conflicts of proxy advisory firms, as well as a mechanism for companies to address errors by these firms. It believes the Commission’s proposal is an important step forward to increase shareholder engagement and promote further growth and public market participation.

While Nasdaq supports the Commission’s proposed approach and believes it promotes transparency and consistency, it appreciates the Commission’s willingness to consider alternatives that may finely tune the Proposal. For instance, Nasdaq and 319 public companies have previously called for conflicts of interest to be disclosed on the front page of proxy advisor reports so that investors can make fully informed voting decisions. Standardizing the presentation of the disclosure will ensure that all clients have sufficient information to properly assess the objectivity and reliability of proxy voting recommendations. Nasdaq believes the Commission should be more prescriptive regarding the presentation of conflicts of interest disclosure.

Nasdaq agrees with the Commission that providing companies with an opportunity to review and provide corrections to draft voting recommendations would ultimately benefit investors by reducing the likelihood of errors, providing more complete information and improving the reliability of voting recommendations.

Nasdaq has previously advocated for proxy advisors to have a line of communication with the companies they analyze. It was joined by 319 public companies calling for the Commission to require transparent processes and practices that allow all companies, regardless of their market capitalization, to engage with proxy advisors on mistakes, inaccuracies, and other significant disputes so that timely resolution of those disputes and corrections to the record can be made. This would minimize the negative impacts that such mistakes can have on the subject company’s proxy voting outreach and its shareholders.

Nasdaq agrees with the Commission that the proposed hyperlink amendment would improve the overall mix of information available to investors by presenting the company’s views in an efficient and timely manner. It believes that it is important for each company to have the opportunity to present investors with its perspective because the Proposal does not require proxy advisors to revise their voting recommendations based on the company’s feedback.

Nasdaq agrees with the Commission about including additional proxy advisor disclosures such as its “methodology, sources of information, conflicts of interest or use of standards." It believes these disclosures are in the public interest, will promote investor protection, and help ensure that investors are provided the information they need to make fully informed voting decisions.

Read the full comment letter here