Proxy Advisory Reform Bill Reintroduced in House

Proxy Advisory Firms

The Association-supported "Corporate Governance Reform and Transparency Act," which would subject proxy advisors to a SEC-managed registration and oversight regime, was reintroduced in the House of Representatives by Congressman Sean Duffy (R-WI).  The reintroduction of the bill reflects that the broader Dodd-Frank reform bill, the Financial CHOICE Act of 2017, is stalled in the Senate and thus smaller pieces that have had past bipartisan support are beginning to emerge.  In the 114th Congress, Center CEO Tim Bartl testified before the House Financial Services Committee in support of similar legislation which had a Democrat co-sponsor and received eight Democrat votes in committee.  This time, the bill was introduced without cosponsors.  The bill closely mirrors the version adopted by the House Financial Services Committee in the 114th Congress and was included in the Financial CHOICE Act, which passed the House in June.  The Corporate Governance Reform and Transparency Act (H.R. 4015) would require proxy advisory firms to:

• File a detailed registration application with the SEC, confirming that they have sufficient resources to fulfill their fiduciary duties in analyzing proxies;
  
  
• Disclose "potential or actual conflicts of interest" relating to the ownership structure of the proxy advisory firm, including whether the proxy advisor provides ancillary services, such as consulting, to corporate issuers, and if so the revenue derived from those services as well as how those conflicts will be addressed; and
  
  
• Provide access to the proxy advisory firm's draft recommendations in a reasonable time to afford the issuer an "opportunity to provide meaningful comment thereon, including the opportunity to present details to the person responsible for developing the recommendation in person or telephonically."

The Association and its Center On Executive Compensation support the bill and will advocate for its passage and work to gather bipartisan support.