Last year, one person was responsible for one-third of all shareholder resolutions at U.S. public companies. One person. This stunning statistic reveals how America's proxy voting system—designed to give shareholders a voice in corporate decisions through representatives—has been hijacked by special interests pushing extraneous agendas rather than protecting investor returns.
Fortunately, Congress and the administration recognize the problem and are considering taking action.
The Wall Street Journal recently reported that the White House is considering executive orders to enhance transparency and address conflicts of interest within the proxy advisory industry and modernize the shareholder proposal system overseen by the Securities and Exchange Commission (SEC). These measures aim to ensure that only individuals with a meaningful stake in a company can submit resolutions with a genuine opportunity for consideration. These actions would go a long way towards de-politicizing proxy season and protecting most public company investors.
Public companies are regulated to protect against conflicts of interest. Naturally, companies who recommend directional changes to the very shareholders who own those companies should be regulated as well.
But the proxy advisory industry is dominated by two firms – Institutional Shareholder Services and Glass Lewis - both of which have a history of committing errors in vote recommendations and are riddled with conflicts of interest.
The Chamber has repeatedly testified before Congress and made recommendations to the SEC on the matter and, when necessary, gone to court to protect modest reforms for proxy advisors that had previously been adopted by SEC. We welcome the administration’s ongoing focus on proxy advisors and the outsized influence they have on corporate governance in the U.S.
We also support changes to the shareholder proposal system under SEC Rule 14a-8, which has been co-opted by a small minority of activists to pressure companies on immaterial social or political issues. SEC Commissioner Uyeda has labeled this system the “tyranny of the minority,” and the facts support that statement.
Companies spend significant time and money responding to politicized campaigns—costs that ultimately fall to shareholders and detract from legitimate concerns. At a minimum, the SEC should codify its current policy that the subject matter of a shareholder resolution must have some type of relevance to the underlying company.
We look forward to working with Congress and President Trump to advance these critical reforms and lead efforts to modernize the U.S. proxy system, ensuring that it puts shareholders first.
