November 17, 2010
Dear Ms. Murphy,
I respectfully submit these comments regarding Reporting of Proxy Votes on Executive Compensation and Other Matters (File Number S7-30-10).
First, and foremost, I ask the Commission what problem they are trying to solve and why this isn't being considered in a broader context. For example, among other things, the concept release on proxy voting talks about the lack of an audit trail in the voting process as well as the power of proxy advisory firms. This proposed rule asks for disclosure on the quantity of votes cast. How can one report the # of votes cast when there is no confirmation that the intended vote instructions or quantity of votes were cast? These proposed rules imposed substantial reporting requirements on investment managers. The proxy advisory/voting agent firms (and Broadridge) have much of this voting data in their systems and will obviously charge investment managers extraordinary fees for the required "reports". This happened with the mutual funds and N-PX disclosures out of SOX and will happen here too.
Is your goal simply to cross off one Dodd-Frank item and move on? How does this rule protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation? Is the rule intended to encourage 13F filers to vote? Is it to enhance transparency and information disclosure? Frankly I don't think this proposed rule accomplishes anything more than crossing this off your "Dodd-Frank To-do List".
I suggest that you simplify this reporting requirement as much as possible. If you must enact something here (and I believe you must) then keep Fund and Investment Manager disclosures the same (simplicity is good). For example:
-Disclose all agenda items where there is vote authority (not just say on pay items)
-Disclose shares voted, not shares entitled to vote (unless you address shares on loan pre-distribution reconciliations, additional proxy concept discussion topics).
-Leave out the with or against management indicator and instead include the management recommended vote - readers can determine on their own if the vote is with/against management.
-Let the party who votes bear the burden of disclosure.
-Set aside the "shared vote authority" examples as it is only a hair to be split later when arguing why someone didn't disclose.
And no matter what, remember that the cost of this disclosure will fall to those who are investing their money. Ultimately this reduces portfolio value and makes the United States a less attractive capital market.
With warmest regards, especially considering the substantial work on your plate...
Oli Stone
Former Corporate Governance, Compliance and Proxy Voting Guru