Center Urges DOL to Undertake a Comprehensive Review of Proxy Advisory Firms

March 18, 2011

Dr. Charles Tharp, the Association's Executive Vice President for Policy, recently testified before a Labor Department hearing panel on behalf of our Center On Executive Compensation that “due to the considerable influence of the proxy advisory industry and the lack of current regulation,” DOL should scrutinize the operations of the firms.  The hearing before the Employee Benefits Security Administration addressed proposed ERISA regulations that would expand the categories of individuals who would be considered fiduciaries.  Echoing the Center’s written comments to DOL, Dr. Tharp stressed that the proposal “is too broad and should not be adopted as currently drafted” since it would result in unintended consequences, such as increased plan costs.  However, the Center concurred with the Department’s long-standing view that voting proxies is an important fiduciary activity of retirement plans, and to the extent that a proxy advisory firm is already considered a fiduciary, that classification should not change.  In addition, Dr. Tharp noted that because ISS and Glass Lewis were “scarcely regulated through a patchwork of regulations, DOL should undertake a comprehensive review of the proxy advisory industry.  In conducting the review, Dr. Tharp urged DOL to work in conjunction with the SEC and other federal agencies that are investigating the proxy advisory industry.