The Securities and Exchange Commission is slated to make a decision on whether it will update a roughly 30-year old set of proxy and investor shareholder rules at a meeting next Wednesday. A revision that many institutional investors are banking on.
Last month, the Commission unanimously approved a measure to elicit responses from the investing public to uncover its opinion on the topic. The last time the SEC did such a review was back in 1976, the federal agency said.
At the July 14 meeting, Commissioners with its division of investment management, corporate finance and trading and markets to hammer out the proposed eight changes it could possibly to the U.S. proxy system.
At the time, the topics of concern included over-voting, vote confirmation issues, proxy voting in securities lending, proxy distribution fees, as well as an issuer’s ability to communicate with the securities’ owners. Alternately, the possible removal of “barriers” for investor vote participation, data-tagging proxy related materials, the process of empty voting and ultimately determining the role of a proxy advisory firm were also on the table, IMW reported.
“With all of these changes, it is time to once again ask the fundamental policy questions that led to the development of the current infrastructure, as well as to examine issues that, three decades ago, either did not exist or were not considered significant,” SEC Chairman Mary Schapiro said previously.
Today, however, both small and large institutional investors, and their relative associations believe that proxy changes are a concern that should be addressed as soon as possible.
In an email Thursday afternoon, Wayne Davis, an information officer for the nearly $206.7 billion California Public Employees’ Retirement System (CalPERS), said the Sacramento-based plan is a “firm supporter of proxy access.” In recent weeks the system has worked with other public pension funds in urging the SEC to adopt “an ownership threshold ho higher than 3% and a holding period requirement of not more than 2 years,” Davis said.
“We strongly believe that proxy access gives investors the opportunity to nominate skilled candidates to boards, individuals accountable to shareholders who can bring fresh ideas to the board,” Davis said.
To add, Ann Yerger, the executive director of the Council of Institutional Investors (CII), a nonprofit association of public, union and corporate pension funds with combined asset of more than $3 trillion, told IMW that it “applaud(s) the SEC’s long overdue action on this important reform.”
“We believe access would substantially contribute to the health of the U.S. corporate governance model and U.S. corporations by making boards more responsive to shareowners, more thoughtful about whom they nominate to serve as directors and more vigilant about their oversight responsibilities,” Yerger said in a Thursday email.
Additional comments from Gerard Fleury, the executive director of the nearly $135 million Manchester Employees' Contributory Retirement System, reveal that while the New Hampshire-based plan does not have a formal policy on proxy voting, it was still “an area of concern.”
“Public plans have a fiduciary obligation to at least be cognizant of the specter of impropriety associated with issues such as executive compensation and to ensure that proxy votes are cast in such a manner as to enhance shareholder value,” Fleury told IMW. “…In a nutshell, the concern of the institutional investor is whether the recommendation of management, which appears on the proxy, is in the best interest of management or of the investor and that the two are not always synonymous.”
According to an announcement yesterday, the Washington, D.C. agency said the Aug. 25 meeting would center on the Commission’s consideration as to “whether to adopt changes to the federal proxy and other rules to facilitate director nominations by shareholders.”
Discussions are scheduled to begin at 10 a.m., the release said.
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