In Focus

SEC’s Clayton Suggests Rule Changes for Shareholder Proposals and Proxy Advisors are Coming

In a December 6 speech, SEC Chairman Jay Clayton said “it is clear that we should consider reviewing the ownership and resubmission thresholds for shareholder proposals,” noting that “a lot has changed” since the current $2,000 ownership threshold was adopted 20 years ago and resubmission thresholds were set in 1954. Clayton also said “there is growing agreement that some changes are warranted” in rules governing how investment advisors assess proxy advisor services they use. That same day, however, a prominent investor representative told a Senate panel that such changes were not warranted. At a Senate Banking Committee hearing on the proxy process, Michael Garland, assistant comptroller for New York City Comptroller Scott Stringer, pushed back on efforts to impose onerous regulations on proxy advisory firms and limit shareholder proposals. In his written statement, Garland chided company targets of proxy advisor reports for inserting themselves between proxy advisors and their investor clients: “To the extent that there are concerns on the quality of proxy advisory firm research, that is our problem as investor clients,” Garland said. He also cited proxy voting statistics to refute claims of undue influence by proxy advisory firms. Garland, who serves as a co-chair of CII, also said critics of shareholder proposals were “seeking to remedy problems that do not exist.”

“Common Ownership” Concerns Unconvincing, CII’s Bertsch Tells FTC

The debate on “common ownership” could discourage asset managers from playing a critical oversight role at portfolio companies, CII Executive Director Ken Bertsch told the Federal Trade Commission (FTC) in a written statement ahead of his testimony at a December 6 FTC hearing on “Competition and Consumer Protection in the 21st Century.” Common ownership occurs when investors hold non-controlling stakes in competing companies. Some academic studies assert that when investors hold stock in rival companies in the same sector, competition among those firms decreases. Bertsch said that there is “no convincing evidence” that common ownership promotes anti-competitive behavior and he warned that some suggested policy solutions would strip index investors of their proxy votes and force asset managers to return to their former “don’t rock the boat” stance toward portfolio companies.

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CII Priorities

Fair Financial RulesSensible, effective rules safeguard investors and strengthen markets.

Dual-Class StockEach share of a public company's common stock should have one vote.

Majority Voting for DirectorsIn uncontested elections, directors should be elected by majority vote.

Universal ProxyIn contests, investors should be free to vote for the nominees they prefer.

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