Nasdaq Leads Major Effort to Improve Proxy Process, Address Proxy Advisory Firm Conflicts

February 22, 2019

Hundreds of public companies have joined Nasdaq in petitioning the SEC to address the “poorly-calibrated regulatory ecosystem” of the proxy process, which is "producing fewer IPOs and driving many companies out of the public markets."

Nasdaq's letter makes several recommendations for the SEC to address proxy advisory firm and shareholder proposal reform:

  • "Adopt strong protections for both companies and users of proxy advisory services to ensure that conflicts of interest are eliminated where possible, minimized and/or mitigated where appropriate, and transparent to the users and subjects of reports;"

  • Address "concerns about proxy advisory firm accuracy and policy creation;" and

  • Revamp resubmission thresholds for shareholder proposals from the current 3%/6%/10% standard to 6%/15%/30%.  This means proponents would have to receive 6 percent support after the first year in order to resubmit the proposal, 15 percent after the second year, and 30 percent after the third.

Commissioner Roisman to take the lead:  At the SEC’s February 6 Investor Advisory Committee meeting, SEC Chair Jay Clayton announced that Republican Commissioner Elad Roisman would lead the SEC’s efforts to “improve the proxy voting process and infrastructure.”

Calling the proxy plumbing system “inefficient, opaque, and unreliable in its accuracy,” Commissioner Roisman thanked Chair Clayton for the opportunity while also calling out concerns about proxy advisory firms and asset manager voting practices, indicating that it is "important for us to study and address these issues, as appropriate."