January 16, 2020
January 16, 2020
Dear Ms. Countryman:
I oppose the SEC's proposals to change the proxy process.
I am an individual investor, retired from a 30-year plus career as a journalist covering the investment industry, including covering regulation of proxy rules. Over that entire time, corporate interests have engaged in a long-term strategy of undermining investor/shareholder input into corporate governance by attempting to restrict access to the proxy, and now, attempting to gain greater influence over proxy advisors. The proposed proxy rules are a sad continuation of this trend and show continued capture of the SEC by corporate interests.
The corporate lobby has once again lined up astroturf-type organizations to lobby for its cause, this time fooling Chairman Clayton and leading to his embarrassing moment at a recent Senate hearing. It should be clear by now that average Americans are not concerned about the intricacies of the proxy process, nor should they have to be concerned about such issues assuming proper oversight by the Commission.
Nor are any investment managers concerned about proxy advisors. A perusal of the comments to this rule make clear that investment managers are against it. Yet, the proposal makes a claim that investment advisors need more transparency from their proxy-advice firms. This claim is dubious. If IAs need more information from the proxy advisors they hire, they are free to ask, and find other proxy services if they are not happy. (Rather than pursuing a heavy dose of new regulation on proxy advisors, the Commission should instead consider relaxing rules where possible, to increase competition among proxy advisor firms.)
Forcing proxy advisors to preview their work with issuers will dilute the value and possibly corrupt the independence of proxy advisors, especially if legal liability attaches. Corporate arguments that such oversight is needed to prevent errors is simply not believable. The SEC's own analysis, Table 2 of the proposal, shows few claimed "errors" given the thousands of proxy filings. Where a controversial vote arises, shareholders and investment managers can research the issue. Proxy advisors will generally be well-versed in the matter. Issuers will be well aware of critics' arguments. Little back-and-forth is needed. As a result, no extra error-checking process is warranted.
Most proxy votes are routine and non-controversial. That's why most individual investors ignore them. It's why institutional investors rely on the automated platforms of the proxy advisors.
Nevertheless, issuers have raised the issue of "robo voting." But this is really a non-issue, because these automated platforms and their robo aspects don't cause managers to ignore their duty to make informed votes. Institutional investors can use proxy-advisor research to whatever extent they want. And, managers' shareholder clients are free to influence the proxy-voting process their investment managers may be using, or advocate on a particular vote.
On another front, critics of ESG investing have joined in the attack on proxy advisors. But proxy advisors are not leading the charge on ESG factors they are simply meeting the demands of their clients. And of course, investment managers are free to ignore or customize ESG screens offered by proxy advisors. ISS has noted, for example, that it offers a range of proxy voting policy options, including policies focused solely on maximizing shareholder value, as well as ESG screens.
Finally, as the Commission knows, the proposal mimics The Corporate Governance Reform and Transparency Act of 2017, a measure pushed by corporate interests. Having failed in Congress, the business lobby is now using the SEC to do an administrative end run.
Because the proposed rule changes failed in Congress, are unneeded, and would be harmful to corporate governance if enacted, they should be rejected.
Sincerely,
Dan Jamieson
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