SEC Offers New Information on Asset Manager Proxy Voting

She criticized the proposal as reflecting the “real interest” of activists and “the ever-growing population of” stakeholders “, for whom proxy voting appears to be the fund’s highest goal” and noted a preference ”For the proposed vote on remuneration. as a stand-alone regulation.

In contrast, Commissioner Allison Herren Lee said the proposed improved disclosure requirements would help investors understand and assess the role of funds and managers in capital markets given their influence.

She cited a recent study showing that BlackRock, Vanguard and State Street Global Advisors hold on average about 25% of the votes in S&P 500 companies, “often with the ability to tip the scales on important corporate governance issues. “.

The three fund giants manage trillions of dollars in equity index funds, which receive special mention in the SEC proposal. “Because the investment policies of index funds generally do not allow them to sell investments in the relevant index, these funds cannot sell a stock if they are not satisfied with the management,” the proposal states.

“Instead, index funds can use their voting rights to become active in corporate governance in order to increase the value of their investments,” he adds, noting that the net assets of index funds represent almost half of the assets of equity funds.

Commissioner Caroline Crenshaw said the proposal corrects “many shortcomings in the current reporting regime, including fund votes on executive compensation, and provides the information shareholders can use to hold funds” for accountability. , which in turn could improve business decision-making. “

Commissioner Elad Roisman expressed “strong reservations” about the proposal he voted for and said his vote “in no way reflects how I would vote on a recommendation to adopt them”.

He disagreed with the categorization of votes, especially those on environmental, social and governance issues. “In 2020, ESG investment strategies have proliferated for a multitude of reasons. It is not yet clear whether they have the power to stay in their current form, but by constantly memorizing their interests in our voting reports, we seem to emphasize the importance of these issues for all investors for years to come. . “

The SEC’s new proxy proposal is the latest example of the Gensler-led SEC moving away from the policies adopted by the agency under former chairman Jay Clayton. In June, the SEC announced that it would not enforce a Trump-era rule that restricts the practices of proxy advisory firms.

Michael J. Birnbaum

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