December 17, 2019
December 17, 2019 Vanessa A. Countryman Secretary Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-1090 Re: File No. S7-22-19 Dear Ms. Countryman: I am writing to express my support for the Security and Exchange Commission’s proposed rule S7-22-19, Amendments to Exemptions from the Proxy Rules for Proxy Voting Advice. Throughout my extensive career in public service, beginning in the Arizona legislature where I served in various leadership roles, I’ve always championed transparency. This rule is especially instrumental given the history of side-stepping and willful misinterpretation that has characterized the proxy advisory sphere. As a result, proxy advisory firms have come to wield too great an influence in the shareholder voting process. I encourage the SEC to follow through on the progress it has made thus far and formally adopt S7-22-19. The time for reform is long overdue. Last year I wrote, “It is becoming increasingly clear that the shadowy procedures for shareholder proxy voting is in desperate need of reform. Members of the business community and the government alike have qualms with the existing process.” In the roughly two decades since proxy advisory firms began offering their services, we have witnessed a grotesque distortion of an open and fair market. Today we find that just two proxy advisory firms, Institutional Shareholder Services and Glass Lewis, dominate 97% of the market.[1] Unsurprisingly, such a duopoly has led to a range of self-serving tactics that undermine outside parties’ ability to challenge these firms’ power. Lack of transparency has led to a cozy arrangement between proxy advisory firms and the various parties they serve. Conflicts of interest arise in numerous forms. Most notably, proxy advisory firms advise institutional investors on how to cast their votes on a host of corporate governance matters, while also providing advice to issuers on how to improve their rating score assigned by the same firms. They inform those who do the voting and those who need to solicit the votes. The prevailing logic dictates that using independent third parties (e.g.; proxy advisory firms) absolves investors of any bias or conflicts of interest concerning their voting. But by tailoring distinct sets of guidelines to suit disparate ideologies, proxy advisory firms afford investors the privilege of neutrality while they use public funds to advance moral or political pursuits. While the financial returns on these kinds of investments remain uncertain, proxy advisory firms can always count on fat paychecks. Perhaps the most telling indicator that these firms have amassed too much power over the outcomes of shareholder resolutions is the rise of “robo-voting.” The breadth of votes that institutional shareholders must cast has become so overwhelming that these investors often do not have the necessary resources at their disposal to properly review recommendations made by proxy advisory firms. Hence, investors will often automatically vote following whatever recommendations the proxy advisory firms make. One study found that investors sided with recommendations made by ISS and Glass Lewis over 80% of the time. Investment managers direct funds on behalf of many different kinds of organizations. Currently, there are $2.6 trillion invested into state pension plans nationwide. Institutional investors who determine how and where to invest this cash flow owe our public servants the duty of care to cast votes with the singular objective of increasing returns. I sincerely commend the SEC for undertaking the laborious task of meaningful proxy advisory reform. It is with great anticipation that I await the SEC’s final determination on this rule. Sincerely, Chris Cummiskey [1] https://www.mercatus.org/publications/financial-markets/how-proxy-advisory-services-became-so-powerful