WASHINGTON, DC—The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness released today a corporate governance alert intended to inform public companies of the implications of the June 2014 Securities and Exchange Commission (SEC) staff guidance on proxy voting. “Corporate Governance Update: Public Company Initiatives in Response to the SEC Staff’s Guidance on Proxy Advisory Firms,” written by former SEC Chair Harvey Pitt, highlights three main issues that public companies should focus on in light of the guidance: communication with proxy advisory firms, managing proxy advisory firm conflicts of interest, and communication with institutional investors.
“Proxy advisory firms have become the de-facto standard setters for corporate governance, yet they lack the due process, transparency and evidenced based standards that shareholders expect,” said David Hirschmann, president and CEO of the CCMC. “Proxy advice should be evidence based, linked to shareholder value with policies developed, and applied in a clear and consistent way – free of any conflicts of interest. The SEC’s guidance is a first step in the right direction to shine a light on the system, and reform it to the benefit of all market participants. Our paper aims to alert businesses to the SEC guidance, and how businesses can play a role in enhancing corporate governance, improving communications with investors, and helping to discern what steps, if any, are needed to develop the system further.”
“The SEC Staff Guidance is a positive first step toward bringing more transparency and rationality to the current system of proxy voting advice,” Pitt noted in the alert. “While the shareholders of public companies—whose interests the proxy advisory system is ultimately meant to serve—stand to benefit, it remains to be seen whether proxy advisory firms will take this opportunity to improve the transparency and efficacy of their business operations. Public companies therefore have a unique and important role to play in order to achieve a more desirable system of proxy voting advice.”
In 2013, the CCMC released “Best Practices and Core Principles for the Development, Dispensation and Receipt of Proxy Advice” which discussed proxy voting practices, offered core principles related to those activities, and included recommended improvements to make the system more transparent and accountable for proxy advisory firms and to foster stronger corporate governance.
Since its inception in 2007, the Center for Capital Markets Competitiveness has led a bipartisan effort to modernize and strengthen the outmoded regulatory systems that have governed our capital markets. The CCMC is committed to working aggressively with the administration, Congress, and global leaders to implement reforms to strengthen the economy, restore investor confidence, and ensure well-functioning capital markets.
The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.