Writing in The Hill last week, ISS’ Head of Governance Business, Lorraine Kelly, provides insight into the SEC’s recent move to push forward with a proposal that favors corporate managers and undermines the system through which institutional investors receive objective, independent analysis ahead of annual shareholder meetings. Kelly explains that, while the SEC is apparently abandoning a key element of its proposal to grant public companies pre-review of independent proxy advice, the Commission is nonetheless advancing a misguided alternative – a so-called “speed bump” – that would impose an arbitrary delay in the process by which many institutions exercise their voting rights.
“Ostensibly, this is being done based on the presumption that institutional investors are not voting thoughtfully and therefore a regulator needs to impose an impediment to stall their workflow if a proxy adviser analyzing a slate of ballot items, such as approving corporate CEO pay, disagrees with management and recommends as such to its investor clients,” Kelly writes in the op-ed.
“The seeming hope, under this thinking, is that recommendations adverse to corporate management won’t so easily be translated into votes when the review process is paused in the face of a contentious proxy adviser recommendation. The reality, however, is that the overwhelming majority of Institutional Shareholder Services’ (ISS) largest institutional investor clients craft their own guidelines and criteria for vote recommendations, and therefore the recommendations they receive are consistent with their perspectives on various issues.”
“…Aside from the fact that this alternative proposal is so markedly different from the original rule proposal that it should require the rulemaking process to start anew, it continues a trend in which the SEC seems to embrace the insulting view that institutional investors are not thinking, much less voting, for themselves. As institutional investors have made abundantly clear, the opposite is true.”
By Lorraine Kelly, Head of Governance Business