Proxy Advisor Regulation — Is a Speed Bump the Answer?
Proxy advisors and others are voicing displeasure at the notion of a “speed bump” when it comes to proxy advisor reports. Even though the comment period for the SEC’s proposed proxy advisor regulations closed back in February, concerned voices haven’t quieted. The latest concern relates to the “speed bump” that Commissioner Elad Roisman spoke about back in March at CII’s spring conference.
During his remarks, Commissioner Roisman mentioned one idea that would allow contemporaneous review — companies would receive and review a proxy advisor’s report at the same time the proxy advisor sent the report to its clients. While a company reviewed a proxy advisor’s report, as a way to manage “automatic voting,” Commissioner Roisman suggested a “speed bump” — basically a time period during which the proxy advisor would disable any automatic voting submission features.
While some see contemporaneous review and a speed bump as an improvement compared to how things stand today, the constituents that don’t are jumping on the “voice of concern bandwagon.”
First, a CFA Institute blog says they want the SEC to propose new rules so details of contemporaneous review and the speed bump can be better understood. Without reopening a revised proposal for comments, the blog says the SEC risks shutting out stakeholders from providing comments.
A recent Pension & Investments article, titled “Truce sorely wanted on proxy proposal championed by SEC” (subscription required), quotes Glass Lewis’s SVP & GC, Nichol Garzon-Mitchell, as saying the proxy advisor still has concerns about some of the alternatives the SEC may be considering and that details of a new proposed approach should be vetted through public comment. The article also quotes representatives of the Investment Advisor Association and the Council of Institutional Investors as saying that the idea of contemporaneous review and a speed bump is promising but more information is needed and basically the SEC should re-propose the rule to sort out potential concerns and issues.
ISS declined to comment for that article, but separately a recent opinion piece from ISS’s head of Governance Research & Voting, Lorraine Kelly, also voices displeasure about the “speed bump” solution. The opinion piece echoes the IIA and CII concerns and suggests because the alternative proposal is so different from the original rule proposal it should require the rulemaking process to go back to start over. The opinion piece concludes by suggesting the SEC shelve the proposed rules.
Give the Commission credit; it’s no easy task to try to change or improve the process around proxy advisor reports and they’ve stepped up to try and address it. The proposed rules are controversial and no matter what is done, somebody’s probably not going to like it. At the same time, companies have been frustrated for years with the existing process for proxy advisor reports so some change would likely be welcome news.
-Lynn Jokela, TheCorporateCounsel.net May 28, 2020
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