The U.S. Securities and Exchange Commission (SEC) plans to investigate the influence of proxy advisory firms and large institutional investors on the shareholder voting process. This move aims to address concerns about the misuse of the corporate governance system and the politicisation of shareholder proposals, as stated by SEC Chair Paul Atkins.
During an interview on Fox Business last Friday, Atkins emphasised the need to focus on this aspect of corporate governance. His remarks follow a speech last month where he outlined the Commission’s intention to “de-politicise shareholder meetings and return their focus to voting on director elections and significant corporate matters.” This includes reassessing rules that require companies to present ESG-related proposals at annual meetings.
The SEC’s initiative comes amid increasing scrutiny on proxy advisory firms like Glass Lewis and ISS. These companies are currently under investigation by the Texas Attorney General for allegedly misleading investors by supporting DEI and sustainability policies. Additionally, there are reports of the Federal Trade Commission investigating the firms for potential antitrust violations concerning their advice on climate and ESG-related issues.
Atkins highlighted the role of these advisory companies, mentioning widespread concerns about conflicts of interest. He stressed the need to address this issue comprehensively. Besides proxy advisory firms, the SEC will also examine large institutional investors and money managers. These entities often position themselves as passive investors but exert significant influence over shareholder voting outcomes.
Atkins noted that while these investors present themselves as passive, they sometimes overstep by attempting to influence management, which is not their intended role. Although specific actions were not detailed, Atkins mentioned that the Commission would consider “proposals and clarifications” within the next year.
