Proxy Plumbing: SEC Re-opens Investigations

Plans to review US proxy plumbing infrastructure "long overdue, but very welcome".

The Securities and Exchange Commission has announced it will re-examine the US proxy voting system. 

The US securities regulator, the Securities and Exchange Commission, is inviting comments on its proposal and will host a round-table this autumn to review key aspects of the shareholder voting and accountability process "The Proxy Plumbing" as it is often called. After an eight-year hiatus[1], the Commission intends to inspect a number of key issues including:

• Mechanics of the Proxy Voting Process;
• Retail Shareholder Participation;
• Shareholder Proposals; and
• The Role of Proxy Advisors

Jay Clayton, Chairman of the SEC, highlighted a number of weakness and deficiencies in the existing proxy process and raised questions about whether the existing regulatory rules are achieving their objectives. Commenting on the announcement, Sarah Wilson, CEO of The Manifest Voting Agency Ltd said: “We welcome and support the SEC’s announcement. Modernisation of global proxy voting is long overdue, investors need a system which is fit for the 21st century. Today, shareholder voting is a fundamentally broken and anti-competitive system which denies investors real choice and voice. Costs and processes are far from transparent, that makes it impossible to determine whether shareholders are getting value for money.”

The SEC’s intervention represents a potentially important regulatory opportunity to support better stewardship and engagement. Since the SEC’s 2010 concept release, it is estimated that U.S. companies have seen shareholder engagement leap with 72% of S&P 500 companies reporting engagement with shareholders in 2017, compared to just 6% in 2010.[2]

Ms Wilson added: “Since the Global Financial Crisis there have been widespread changes in financial services including acceptance of new technologies, open messaging standards, and initiative such as Legal Entity Identifiers (LEIs) to support operational efficiency and effectiveness. Companies and shareholders need regulatory frameworks to support their stewardship efforts and protect their legal ownership rights. There have been too many examples of lack of integrity in the system, with uncertainty about data security, confidentiality and misaligned incentives. Shareholders deserve better. The SEC needs to let us get on with our job of giving investors what they want - a seamless, secure and trustworthy voting experience.”

Proposals to review the regulatory framework for proxy advisors were also welcomed. Ms Wilson commented: “The debate around the role of proxy advisors over the past eight years has been nothing less than toxic. The anti-governance rhetoric is getting in the way of investors’ relationships with investee companies on a global scale and needs to be addressed once and for all. It’s time to get the facts on the table and we support the SEC’s action in this regard.”

In a recent blog post for the Harvard Law School, governance pioneer Nell Minow criticised the most recent attack on proxy advisors and shareholder resolutions from the so-called Main Street Investors’ Coalition for “inflammatory language, unsupported assertions, and out-and-out falsehoods”. [3]

About The Manifest Voting Agency Ltd

The Manifest Voting Agency Ltd is a UK-based proxy voting service which was founded in 1995. Manifest offers investors a confidential “straight through” electronic voting service which provides legal vote confirmations operating on an "open message standards" business model.

In 1997 Manifest published the first open standards proxy voting message format and commenced lodging electronic proxies directly with UK registrars using strong encryption to ensure message integrity. In spring 2016 following a management buy-out, Manifest became a wholly owned subsidiary of Minerva Analytics Ltd.

For more information please contact:

Eden Smith, Communications Manager | Tel: 01376 503500 | Email: hello@minerva-analytics.info

Sarah Wilson, CEO | Tel: 01376 503500 | Email: sarah.wilson@minerva-analytics.info

[1] See https://www.sec.gov/rules/concept/2010/34-62495.pdf 14 July 2010 for more details

[2] See https://corpgov.law.harvard.edu/2018/06/14/the-main-street-investors-coalition-is-an-industry-funded-effort-to-cut-off-shareholder-oversight/ 14 June 2018