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Dodd-Frank

SEC Staff to Hold Roundtable on the Proxy Process

by   |   July 30, 2018

In 2010, the SEC issued a concept release seeking public comment on whether the U.S. proxy system as a whole operates with the accuracy, reliability, transparency, accountability, and integrity that shareholders and companies should expect. In light of the many changes in our markets, technology, and how companies operate since then, SEC Chairman Jay Clayton issued a statement noting SEC staff will host a roundtable this fall to hear from investors, issuers, and other market participants about whether the SEC’s proxy rules should be refined.

The statement said SEC staff will announce the roundtable agenda items shortly. As they develop that agenda, Chairman Jay Clayton has requested that staff consider certain topics, highlights of which are noted below.

Voting Process: Potential topics include the potential for over-voting and under-voting of securities by broker-dealers and practical difficulties in confirming whether an investor’s shares have been voted in accordance with the investor’s instructions.

Retail Shareholder Participation: Potential topics include reasons for the relatively low retail vote participation and how existing rules or market practices affect the ability of individuals who invest in the public markets through investment vehicles such as mutual funds and pension funds to participate in the governance of public companies in which they have an interest.

Shareholder Proposals:  Potential topics include whether the current thresholds for minimum ownership (e.g., shares held and length of time) to submit a proposal to be included in the company’s proxy statement appropriately consider the interests of all shareholders.

Proxy Advisory Firms:  Potential topics include whether various factors, including legal requirements, have resulted in investment advisers to funds and other clients relying on proxy advisory firms for information aggregation and voting recommendations to a greater extent than they should and whether issuers are being given an appropriate opportunity to raise concerns if they disagree with a proxy advisory firm’s recommendations.