The U.S. Securities and Exchange Commission (SEC) will examine and propose actions focused on the role of proxy advisory firms and large institutional investors’ influence over the shareholder voting process, in order to tackle “the abuse of the corporate governance system and weaponization of shareholder proposals by politicized shareholder activists,” according to comments by SEC Chair Paul Atkins.
In his comments, made Friday during an interview on Fox Business, Atkins added that “it’s time to focus on this particular area of corporate governance.”
The remarks follow a speech last month by Atkins outlining the Commission’s plans to “de-politicize shareholder meetings and return their focus to voting on director elections and significant corporate matters,” and in particular to re-evaluate rules requiring companies to bring ESG-related proposals to a vote at annual meetings.
The SEC’s plans come as proxy advisory firms such as Glass Lewis and ISS face increasing pressure from Republican politicians in the U.S., including a recently-announced investigation into the companies by Texas’ Attorney General, alleging that the companies potentially misled investors by recommending they vote for companies implementing DEI and sustainability policies, as well as recent media reports that the Federal Trade Commission (FTC) is investigating the firms for potential antitrust violations focused on their advice on climate and ESG-related issues.
Regarding his comments about the politicization of shareholder voting, Atkins said:
“These particular advisory companies play a role, the charges of conflicts of interest are really legion, the stories, and so we have to address this issue overall.”
In addition to the proxy advisory firms, Atkins said that the SEC will examine large institutional investors and money managers that position themselves as passive investors, but have significant influence as large shareholders over the outcomes of shareholder voting.
Atkins said:
“They are passive investors, this is how they position themselves in the marketplace and with the SEC with their filings… where they get out of line I think is where they act to try to influence management, and that’s just not their role.”
While he did not specify specific planned actions, Atkins said that the Commission will be looking at “proposals and clarifications,” adding that it will be within the next year.
