In Focus

CII Files Additional Comment Letters Critical of SEC Proxy Advice Proposal

CII filed two more comment letters February 13 criticizing the SEC’s proposed rules for proxy advisory firms. The first supplemented a letter CII submitted February 4 that analyzed corporate claims of factual errors in proxy advisors’ reports and concluded they were unfounded and misleading. The paucity of evidence of pervasive factual errors suggests that the SEC’s rulemaking is not necessary or justified, CII said in the February 4 letter. In its February 13 follow-on letter, CII posed a series of questions for the SEC to consider if it plans to produce a rigorous economic analysis of the proposed rule. The second February 13 letter was signed by CII and representatives of 12 institutional investor members, including Wellington Management and Aberdeen Standard Investments. It specifically challenges the SEC proposal to require proxy advisors to give companies an opportunity to pre-review proxy advisors’ reports before they are delivered to the proxy firms’ paying investor clients. The delay “will make thoughtful voting much more difficult or impossible, and likely add substantial costs that are not reflected in the SEC’s cost/benefit analysis,” CII and the co-signers said.

CII Sharply Criticizes SEC Proposed Rules on Proxy Advice and Shareholder Proposals

CII submitted comment letters to the SEC January 30 strongly opposing the Commission’s proposed rules for proxy advice and shareholder proposals. Both would undercut important shareholder rights, hamper the ability of investors to cast informed votes at public company meetings and restrict the collective voice of shareholders. In a statement, CII said the two proposals are the most significant attempt by the SEC to limit the voice of shareholders since the Commission was created in 1934. If adopted, both proposals would introduce complexity and micromanagement in proxy voting and in shareholder-company engagement processes that have worked well for decades. CII urges the SEC to withdraw the proposals and focus instead on festering problems in the proxy voting system. View both letters on CII’s Correspondence page. “The SEC has failed to make the case for the drastic regulatory scheme it would impose on proxy advisory firms, or for rolling back shareholder proposal rights, ”said CII Executive Director Ken Bertsch. The SEC’s first priority, Bertsch said, “should be to fix the creaky proxy plumbing—the nuts and bolts of the ways that proxy cards are solicited and votes are counted. Putting roadblocks in the way of shareholder voting in a system that does not deliver accurate vote counts does not make sense.” CII and many institutional investors are especially alarmed by the heavy-handed regulatory structure the SEC has proposed for proxy advisory firms that provide institutional investors with independent research on the fairness of CEO compensation and other matters on company ballots at shareholder meetings. CII believes the proposed new rules are unwarranted and unworkable. In its comment letter, CII suggested a more narrowly focused process for giving companies a window to review the data proxy advisors assemble as the basis for their reports and recommendations.