Comment Letter to SEC on Proposed Proxy Rules for Proxy Voting Advice

Summary of Study

Bottom Line: The Society for Corporate Development applauds the SEC’s proposed proxy advisor rule, which it believes will help improve the proxy process, including addressing longstanding concerns about proxy advisors such as conflicts of interest, robo-voting, and widespread mistakes.

The Society applauds and commends the SEC for rules will improve the proxy process by:

  1. Ensuring that proxy voting is done with the benefit of recommendations based on information generally available in publicly filed documents.
  2. Ensuring that all companies—not just the S&P 500—have advance access to the reports so that they can review and advise of mistakes of fact so the reports can be corrected before their shareholders vote. 
  3. Providing all registrants the ability to include in the report a link to a publicly filed statement explaining a mistake of fact or analysis in the hopes that investors will see it in a timely manner contemporaneous with a proxy advisor’s recommendation or report. 
  4. Requiring the proxy advisors to disclose their conflicts in a meaningful way. 
  5. Clarifying that the SEC and the listing exchanges are the corporate governance standard setters, and not the proxy advisors.

The Society recently conducted a survey of its members to solicit feedback on errors in reports. The survey asked first whether they were aware of any factual errors, omissions of material facts, or errors in analysis in the last three years. It found a total of 134 members responded to the question, with 56 (or 42%) answering in the affirmative.

The Society also received complaints about automatic proxy voting systems, which allow clients to:

  1. Populate each ballot with recommendations based on preset voting instructions or policies.
  2. Submit the client’s ballots for tallying without requiring the client to review the proxy advisor’s analysis or confirm their vote.

The Society applauds and supports the Commission’s efforts to encourage greater accuracy and completeness in the voting recommendations and related information included in proxy advisory reports. By mandating a review-feedback-review process, the proposed rule creates the due process essential to providing accurate and timely proxy voting advice to investors.

The opportunity for registrants to provide a hyperlink to a company response on particular issues will provide investors a much-needed and convenient way to access the company's perspective on erroneous statements. The due process provided by the proposed rule is critical to ensuring that proxy voting advice will be based on the most accurate information reasonably available.

Read the full comment letter here