Subject: File No. S7-22-19
From: Nell Minow
Affiliation: Vice Chair, ValueEdge Advisors

March 10, 2020

A second supplemental comment, reflecting new information and responses to some of the other comments:

1. Further Evidence that Corporate Claims of Zombie Robo-Voting are Bunk: We have noted previously that assertions that fund managers "robo-vote" are unsupported and contrary to the data. The findings of a new study by Lily Tomson of ShareAction prove that the claims of the Chamber of Commerce and its various sock puppets along those lines are complete bunk, and therefore any "benefits" from reducing such fictional votes are also non-existent. The study finds that ISS clients depart from the ISS recommendations on (for example) environmental issues. We have previously noted their departure from ISS recommendations on executive compensation issues. The study's conclusions:

Finding 1: ISS, the largest proxy advisor, is more supportive of environmental and social resolutions than the largest asset managers. The majority of asset managers in our study are less supportive of ESG issues than ISS, with the largest asset managers being the least supportive.
Finding 2: There is little evidence to suggest a systematic overreliance on the recommendations of proxy advisors for responsible investment resolutions.
Finding 3: ISS is more likely to recommend that investors support environmental and social shareholder resolutions than the second largest firm, Glass Lewis.
ISS recommended that investors vote For a shareholder resolution 79% of the time, which was much higher than the 53% of votes supported by Glass Lewis, in our sample.
In aggregate, these findings suggest that previously-raised concerns about the overreliance of asset managers on proxy advisors may need reconsideration. Instead of focusing on degree of overlap between proxy advisors recommendations and asset managers votes, our findings suggest that the onus should firmly be placed on asset managers to vote in a manner which fosters a more responsible investment system and world. We conclude with recommendations for asset owners.

The complete report is online here and is incorporated into these comments by reference.

2. We concur with the op-ed by Jonathan Macey of Yale, titled "Behind the SECs War on Freedom of Speech:" He writes:

"A number of corporate managers are enraged when proxy advisory firms call them to account for acting against the interests of the companys shareholders. What is surprising is that the Securities and Exchange Commission has chosen to favor management and undermine shareholders rights and interests."

The full essay is at and we incorporate it by reference as well.

3. We note for the record that since the Commission has apparently not cleared the proposed rule with the Office of Legal Counsel at DOJ, we have written to ask them to review the concerns we and others have raised about the Constitutionality of the prior restraint and freedom of speech and press issues raised by the proposal. We encourage the Commission to request a formal review. The comments Commissioner Roisman made today at CII suggest other options currently under consideration by the Commission that are also potential First Amendment violations, so this analysis is even more pertinent.

4. We note for the record that we have also written to OMB's OIRA to raise our concerns about the rule's violation of the basic principles of cost-benefit analysis, and regulatory and economic policy we raised in our comment, as it is their responsibility to examine, evaluate, and coordinate federal rulemaking with special attention to those matters.

5. We were disappointed by many elements of Commissioner Roisman's comments this morning at the CII conference, which did not address the fundamental concerns we and others have raised about this proposal and in particular his weak response to the issue of fraudulent comment letters. It may be, as he said, that it is a "bigger issue" than this one rulemaking, but that has no relevance to the Commission's obligation to disinfect this particular rulemaking by examining the sources of the comments carefully. There is no evidence, as he claimed, that this is a "both sides" issue. The comments supporting the rule may not all be fraudulent, but all of the fraudulent letters (including undisclosed recipients of funding from the Chamber of Commerce or other corporate sources) support the rule. There is all the difference in the world between a comment that was not actually signed by the person whose name is at the bottom and a comment that may have been drafted by others but is genuinely submitted by the signer. It is particularly disturbing that those supporting the rule focus on conflicts of interest at a proxy advisor without disclosing their own. One thing economists are supposed to understand is incentives, even when those incentives go directly to their own pocketbooks.

We thank the Commission for your consideration and we will continue to monitor this matter and provide further comments as necessary.