Jan. 29, 2020
Re: File Number S7-22-19 Dear Secretary Fields: Many Americans are concerned with an overall lack of oversight of proxy advisors due to the increasing propensity of this system to incorporate activist political views ahead of their fiduciary duties. I am writing because I also share this concern, and as a private investor and energy advocate, I feel this is distorting the traditional corporate governance that is fundamental to America’s economic competitiveness. The most fundamental reason I believe proxy advisors should be scrutinized is because they are partially responsible for delivering poor returns to the pensioners they are supposed to be looking out for. These retirees are the backbone of our country—teachers, policemen, firefighters, veterans who protected us when we were growing up. They weren’t paid handsome sums during their careers, but they were promised good, stable retirements, and they deserve fund managers who are looking out for them. So-called environmental, social, and governance (ESG) investing has been shown to yield 43.9% less when compared to the S&P 500—that’s simply not fair. Which brings me to the second reason. I strongly object to the concept that proxy advisors know best and can intimidate American companies by leveraging pensioners’ funds without their input. This skews the marketplace for investors like me and gives good, responsible businesses a bad name. Of course, Texas is a global leader in energy, and several of the major energy companies have headquarters here. In recent years, I truly feel the leading names in the industry are doing everything reasonable to address environmental concerns. But ESG investing has arbitrarily decided energy firms are contemptible. There is a fundamental lack of transparency on proxy advisory firms’ decision-making. Just two firms dominate the market, and they are not required to disclose their conflicts of interests or how they arrive at their decisions. Often their positions are extreme, with proposals struggling to gain support from even ten percent of shareholders. This is distorting the way corporate governance is conducted. I wholeheartedly support significant new regulation of proxy advisors and requiring pension boards to put their investors first and foremost in their decision making. Thank you for the opportunity to submit my comments to the SEC’s docket, and I hope you will take them into consideration. Respectfully, Guillermo Aguilar