While the SEC’s recent roundtable discussions on proxy voting didn’t result in concrete results or a consensus on how to move forward, the fact that the issues surrounding proxy processes are being discussed at this level indicates that regulators are listening to concerns.
The outsized influence of proxy advisory firms such as ISS and Glass Lewis in the proxy voting process is one area that is currently being looked at very closely, according to TK Kerstetter, Corporate Board Member’s Editor-at-Large and the CEO of Boardroom Resources.
“Probably the most emotional issue in that affectionately-called ‘proxy plumbing’ roundtable is the issue about the influence of both ISS and Glass Lewis,” Kerstetter says. “That’s the most emotional piece of that roundtable discussion—what happens with the ISS and Glass Lewis piece.”
SEC roundtable participants discussed how the role of proxy advisory firms has evolved over the years, as well as the ways in which their roles and relationships with institutional investors can be improved moving forward. While panelists didn’t voice overwhelming support for increased regulation over influential proxy advisory firms, some did voice concern over the inability of newer advisory firms to compete against established firms.
“There are emotional people taking positions on both sides of that argument,” Kerstetter says, “So, we’ll wait to see how the SEC handles that.”
Panelists in the SEC roundtable also discussed shareholder engagement and concerns about the current proxy voting and solicitation process for shareholder meetings. The discussion revolved around the transparency and accuracy of the proxy voting and solicitation system, how it can be improved and what the SEC should be considering in effort to make the system better.
While the roundtable discussion illustrates that regulators are paying at least some attention to proxy voting issues and the concerns surrounding them, it remains to be seen whether the discussions will result in new regulations.
“I think some of it will be addressed, some of it in a needs attention,” Kerstetter says. “But some of the issues that need addressing haven’t been addressed in a long time. I assume proxy voting is going to be looked at, and it’s worth a look.”