Shareholder coalition may force rules on proxy firms.
In governance circles, just try to start a discussion about the amount of influence proxy advisory firms have over corporate decisions made during proxy season and within seconds, a heated argument will erupt. A topic of debate for years, the discussion is about to percolate yet again.
The Business Roundtable, National Investor Relations Institute and the Society of Corporate Secretaries and Governance Professionals have joined together to make a formal proposal to the SEC advocating new regulatory rules governing proxy advisory firms. Under the banner the Shareholder Communications Coalition (SCC), the group is asking for rules that provide: 1) regulatory oversight of proxy advisory firms; 2) increased transparency from proxy advisory firms; and 3) accuracy of factual information used by proxy advisory firms.
The formal request, made in a letter from SCC executive director Niels Holch, is in keeping with the three member organizations’ mandates to support good governance practices that are in the best interests of its constituents. As the proxy advisory firms are in the business of helping corporations improve their governance policies, you would think there would be some agreement on changes to the system that are in the best interest of good governance in the marketplace. We’ll see.
While it isn’t clear yet if there is going to be a big push back on this from the proxy advisory firms, you can bet there will be some prickly negotiating on the types of regulations the SEC may wish to impose on the proxy advisory firms. The SEC has telegraphed its intensions to impose some type of oversight or guidelines for the proxy advisory firms, but it’s quite possible that the agency may impose more rules than the proxy advisers will like or fewer than the coalition wants.
Since it is clear that some change is coming, it would be nice if the proxy advisory firms would jump out in front of this issue and draft some changes they would be willing to enact on their own in an effort to address the concerns of the coalition. After all, isn’t this the advice many firms give their clients? Communicate and propose changes you are willing to make BEFORE a major proxy fight erupts. As organizations that consistently reprimand corporations for not following good governance practices, wouldn’t it be best to create some good governance practices for the proxy advisory industry BEFORE somebody else does?
Hopefully we are now one step closer to getting there…
