February 18, 2011
Expanding the debate on proxy advisory firm regulation beyond the SEC, the Center On Executive Compensation’s Charlie Tharp will testify at the Labor Department on March 2 urging it to comprehensively investigate the industry. The hearing by DOL’s Employee Benefits Security Administration is on a controversial rule proposed by DOL, which is opposed by the Center. The rule broadens the definition of “fiduciary” under ERISA to increase the duties of company pension plan officials and related service providers, including proxy advisory firms. An early interpretation by the Department made proxy voting a fiduciary duty under ERISA, and the hearing will give the Center an opportunity to make the case for why DOL should exercise greater oversight under existing interpretations. The Center believes it is imperative that because of their influence on proxy voting, ISS and Glass-Lewis be subject to the same rigorous standards. This is true despite the fact that they have different business models. However, the DOL’s proposed regulations are so broad that the Center filed comments opposing them because they "could conceivably sweep in as a fiduciary any person who provides input to a plan, a plan fiduciary, or a plan participant or beneficiary" and thus "increase plan costs and harm plans, participants fiduciaries and plan sponsors."