In Focus

Universal Proxies, Blockchain Technology are Keys to Proxy Voting Reform, CII Executive Director Tells SEC Committee

The current proxy plumbing regime needs to be reformed to create a proxy voting system that is timely, accurate, transparent (including routine end-to-end vote confirmation) and efficient, CII Executive Director Ken Bertsch told the SEC’s Investor Advisory Committee at a September 13 meeting. “The current system of proxy voting is fraught with inefficiencies and a too-large margin for error,” he said. Bertsch urged the commission to move forward on its 2016 proposal to allow the use of universal proxies in contested director elections and to look seriously at using private blockchains, system-wide, operated by trusted third parties, to improve reliability and transparency. He explained that universal proxy cards would allow shareowners to “split their tickets” and vote for the combination of shareowner and management nominees that they believe best serve their economic interests. Bertsch encouraged the SEC to explore the use of a blockchain-based voting system to improve the timeliness, accessibility, accuracy, certainty and cost-effectiveness of proxy voting.

CII Responds to President’s Quarterly Reporting Tweet

In response to President Trump’s August 17 tweet announcing that he has asked the SEC to study relaxing the quarterly financial reporting requirements for public companies, CII issued a statement affirming the value of timely, accurate financial information to investors. “Investors and other stakeholders benefit when regulations ensure that important information is promptly and transparently provided to the marketplace,” said Amy Borrus, CII’s deputy director. President Trump suggested shifting from quarterly reporting to reporting every six months, but CII shares the view of the SEC’s Investor Advisory Committee that the current degree, quality, and frequency of disclosure strengthens U.S. capital markets. CII does, however, believe that public companies should focus on building long-term value by moving away from quarterly earnings per share guidance.

CII Rebuts Wall Street Journal Editorial on Proxy Advisors

CII issued a statement detailing factual errors in a Wall Street Journal editorial that asserts that proxy advisory firms have too much influence over shareholder votes. Investor independence is clear in voting statistics, CII points out. Although leading proxy advisor Institutional Shareholder Services Inc. (ISS) recommended voting against say-on-pay proposals at 11.8% of Russell 3000 companies in 2017, just 1.4% of those proposals received less than majority support from shareholders. CII also noted that proxy advisors’ voting recommendations generally align with management’s. ISS endorsed management’s proposals on 89% of the more than 21,000 ballots cast in the first half of 2018 in director elections, auditor ratifications, say-on-pay votes, and on employee and director equity plans at Russell 3000 companies. The Journal editorial attacks proxy advisory firms unfairly for doing the work that institutional investors willingly pay them to do, CII Executive Director Ken Bertsch said in the statement.