Institutional investors view the Securities and Exchange Commission's proposed rules for proxy advisory firms and shareholder resolutions much differently than the business community.
In November, the agency voted to put forth proposed rules that would require proxy advisory firms to disclose more about their process and potential conflicts of interest and give companies the opportunity to make revisions before making final recommendations to clients. Separately, the thresholds for submitting proposals, and subsequently resubmitting them would be raised, making it likely that fewer proposals will be introduced or appear on ballots.
On one hand, Michael Garland, assistant comptroller, corporate governance and responsible investment in the office of New York City Comptroller Scott M. Stringer, the fiduciary for the five pension funds within the $215.5 billion New York City Retirement Systems, said in a statement that the two SEC proposals "will only serve to insulate management and directors from accountability to shareholders."
On the other, Erik Rust, Washington-based director of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, favors both proposals. "You're hopefully going to see proposals come from investors that have a long-term interest in the company and aren't trying to influence short-termism or activist or specialized interest," he said.
A study from MSCI Inc. released earlier this month examined more than 2,300 shareholder proposals that went to a vote at U.S. companies from 2015 to 2019. It found that 30.9% of proposals were submitted by individual investors. It also found that 55.3% of the proposals submitted by those individual investors obtained "significant support," defined as winning more than 30% of total votes cast.
Ric Marshall, Portland, Maine-based executive director on the ESG research team at MSCI, said that support dispels the notion that shareholder proposals are simply filed by gadfly investors. "If these were just nuisance filings, if these were just frivolous requests, they wouldn't get that kind of support from what's obviously a much more sizable part of the investor community," Mr. Marshall said.