SEC sends in the proxy plumbers

The SEC has reaffirmed its commitment to reform the US proxy voting system. In a speech to Chicago’s Northwestern University School of Law on October 2nd Commissioner Elisse B. Walter outlined the SEC’s position on the mechanics of shareholder voting: “To further our goal of improved corporate governance, our staff is also taking an in-depth look into proxy voting mechanics (such as over and empty voting) and shareholder communications issues (including the “NOBO/OBO” distinction), a project we refer to as “Proxy Plumbing. Just as it is in your homes, this “plumbing” is critical to the proper functioning of the proxy process. Meredith Cross, our Director of the Division of Corporation Finance, and her staff certainly agree. And, I expect that the Director of the Commission’s newly-established Division of Risk, Strategy, and Financial Innovation, Dr. Henry Hu, will be extremely helpful to us in resolving these issues.”

The previous day, Niels Holch, Executive Director of the Shareholder Coalition met with senior SEC staff to discuss the Coalition’s recommentations for improving the US shareholder communications and proxy voting system. Key issues on the Coalition’s agenda are end-to-end confirmation of vote totals; and a system which facilitates direct communications between issuers and their beneficial holders.

Transparency of the proxy advisory industry and the lack of oversight and transparency featured strongly in the discussions. According to Holch, the SEC has confirmed that these concerns will be a part of the SEC’s evaluation of proxy infrastructure.

The Shareholder Coaltion has published a seven point plan for reform:

  1. Investor education
  2. Elimination of OBO/NOBO classification
  3. Competition amongst Proxy Service Providers
  4. Beneficial owner list compilation
  5. Proxy vote counting and tabulation
  6. Beneficial owner proxy authority
  7. Integrity of voting process


SEC Speech >>

Shareholder Coalition Reform Proposals >>

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