Companies want better access to shareholder lists and proxy advisor regulation
Dear readers,
Governance people are a relatively diverse bunch but one thing that is common among almost everyone in the field is punctuality. This is especially true for corporate secretaries who spend most their lives adhering to all sorts of very important filing deadlines.
With this in mind, I was a little surprised at how many of you left it so late to comment on proxy reform. As I am sure you are all aware, the window for submitting a comment letter to the SEC closed yesterday.
I decided to do a little analysis and the discovered that, according to the list of official comments posted on the SEC website, a total of 178 comment letters were filed since July. That includes 92 letters that were filed this week, 50 of which weren’t submitted until the very last minute.
Even though most people left it late to comment, the number of people who had something to say pleasantly surprises me. All the usual cast of characters were there – most the activist investors, large pension funds, trade union and labor groups, the odd gadfly and a slew of academics. What is interesting to me is that, of the 92 filings that were made this week, only 22 were from corporate issuers (if you exclude those issuers who play an active role in the proxy process).
If you were to sit down and read the letters, which I did, you will soon notice a few common themes. A lot of the letters came from companies or individuals with strong vested interests in the operation of the proxy system. I excluded some of the comments from vendors and service providers. The number one issue is shareholder identification. Most companies and several academics want the OBO/NOBO distinction scrapped, or at the very least seriously modified. In fact, very few people who submitted comments made strong arguments to keep the current restrictions.
A lot of ink was spent on alternative voting rules and it seems that client directed voting is emerging as the crowd favorite. It probably wont surprise anyone to see that role of proxy advisory firms was a popular topic. Several corporates are arguing for regulation of the industry and increased transparency. While this might well be a good thing, you do have to be a little careful. Regulation can have its benefits and it may even out the influence of certain firms, but it can also create barriers to entry. If that happens, competition in the space could diminish which will centralize the influence of the major players even further. That would also lead to an increase in costs. I understand the call for regulation but we need to be very careful how the rules, if they actually happen, are worded.
Rounding out the top four most common comments is a call for a breakup of the alleged monopoly in the proxy fulfillment space and forcing more competition. A recent study suggests that by making it easier for other firms to enter the fulfillment space, fees would plummet and the market would become more efficient. Only time will tell if that is the case but it appears likely that the SEC will attempt to make the market more equitable.
Will all this going on, it might have been easy to miss some other important developments in the governance space. In addition to the proxy comment period ending the SEC came out with the first draft of its rules for say on pay, and the Society of Corporate Secretaries and Governance Professionals announced its new CEO.
I would like to be one of the first to congratulate Ken Bertsch on his appointment as CEO of the Society. I have been following this since the spring and I am excited about this appointment. Taking on someone from outside the core Society group is a bold, and I believe inspired, move on the board’s part and I think Ken is the ideal candidate to help guide the Society through the next stage of its development.
It really was quite a week.
