SEC Moves to Reverse Proxy Voting Advice Regulation

November 19, 2021

The Securities and Exchange Commission voted 3–2 along party lines to propose partially reversing important 2020 proxy voting regulations.  The proposed changes would eliminate access to final proxy advisory firm reports for all companies and distribution of company responses to voting recommendations to investor clients.

The Commission’s proposed amendment:  

  • Rescinds a 2021 rule that proxy advisory firms share their recommendations with corporate executives at the same time as shareholders. 

  • Removes liability consequences for proxy advisors if they fail to disclose material information regarding proxy voting advice.  The rules will still prohibit material misstatement of facts. 

“Nothing has changed since we adopted the rule…we might as well simply acknowledge that the political winds have shifted.”  In their dissents, Commissioners Elad Roisman and Hester Peirce expressed many concerns that the Association’s Center On Executive Compensation has expressed in the past and that it will echo in our own comments.  These include the fact that the 2020 rules have not even taken effect yet, the negative impact of rescinding the requirement to share draft reports with companies, and the deleterious effect of playing “ping-pong” with regulations based on political regime changes. 

Outlook:  The proposed rule will be published in the Federal Register in the coming days.  The public will have 30 days to submit comments on the new proposed plan.  The Center has advocated for greater proxy advisor accountability since 2018 and supported the 2020 rules.  The Center will submit comments focusing on the above points and will work closely with the SEC to ensure the viewpoints of our member companies are heard.