Statement on Proposal to Enhance Reporting of Proxy Votes by Registered Management Investment Companies And Reporting of Executive Compensation Votes by Institutional Investment Managers
Sept. 29, 2021
Opening Statement and Thank Yous
Good morning. This is an open meeting of the U.S. Securities and Exchange Commission on September 29, 2021. I want to welcome members of the public who are listening in.
This is my first open meeting as Chair of this remarkable agency. While there will be times when we vote on rulemakings via seriatim, I like open Commission meetings. I think open meetings can bring greater transparency to our work, and the public benefits when we can open up our deliberations to them. I hope it will be the first of many during my tenure.
Today, the Commission will consider a staff recommendation to propose amendments to Form N-PX to enhance the information that investment companies report about their proxy votes. The proposal also would require certain institutional investment managers to report how they vote proxies relating to certain executive compensation matters. These votes have come to be known as “say on pay.”
I am pleased to support the staff’s recommendations and look forward to putting them out for public comment, subject to this Commission’s vote today. To those members of the public in the audience, I encourage you to weigh in and provide comments.
I want to thank my fellow Commissioners and their counsels for their helpful comments, along with the staff who have carefully considered today’s recommendation. Specifically, I would like to thank:
- From the Division of Investment Management: Nathan Schuur, Gregg Jaffray, Terri Jordan, Tim Dulaney, Angela Mokodean, Brian Johnson and Sarah ten Siethoff.
- From the Office of General Counsel: Amy Scully, Bob Bagnall, Natalie Shioji, Malou Huth, Meridith Mitchell, and John Coates.
- From the Division of Economic and Risk Analysis: Hanna Lee, Marina Martynova, Alex Schiller, Oliver Richard, and Jessica Wachter.
I also would like to thank General Counsel John Coates, who is leaving the agency in the coming weeks. While he’s only served a short while, John has been a remarkable counsel to the agency and counselor to me. He’s brought to the job excellent judgment, knowledge of the securities laws, and an ability to connect with colleagues and foster collaboration. I am grateful for his service and wish him well.
I will now turn it over to Sarah ten Siethoff, Acting Director of the Division of Investment Management, to introduce the presentation. Nathan Schuur, the team lead from the Division of Investment Management, will give the staff’s presentation of their recommendation. Oliver Richard, Associate Director of Policy Economics of the Division of Economic and Risk Analysis, will then summarize the potential economic effects of this proposal. Following their presentations, we’ll turn Commissioners Peirce, Roisman, Lee, and Crenshaw for remarks and any questions.
Statement of Support
Today, the staff has made recommendations to increase transparency on two important aspects of proxy voting.
The first is a mandate from Congress. In the wake of the 2008 financial crisis, under the Dodd-Frank Act, Congress required the SEC to require managers to report on how they voted on certain executive compensation matters. These votes have come to be known as “say on pay.”
In 2016, the SEC finished related rules requiring companies to hold these executive compensation votes.
Until today, though, we had not finished an important remaining piece: Today, we are proposing a rule that managers report their votes on these executive compensation matters to investors on Form N-PX. This would complete implementation of section 951 of the Dodd-Frank Act.
The second part of this proposal is to bring greater consistency, transparency, and usability of Form N-PX. This would allow investors to more easily understand and analyze proxy voting information that filers report.
Form N-PX was first adopted nearly two decades ago. It had a basic principle: that investors in funds would be informed of how funds voted shares held on their behalf, also known as voting proxies.
Before adopting Form N-PX in 2003, funds didn’t have to disclose their proxy votes. Since then, funds have been required to disclose these votes at least once a year. This disclosure was designed to satisfy investors’ interest in understanding how funds they hold are voting proxies.
A lot has changed since that time, but that basic concept has stayed the same. Time and again, we’ve seen the desire from investors for more information on these matters.
Over the last couple of decades, though, investors have expressed concerns that they’re not getting readily usable information they desire from this form.
I think that we can increase the efficiency and usability of these forms. These Form N-PX filings sometimes can be more than a thousand pages long. Additionally, votes on the same matter might be reported inconsistently from fund to fund. Third, many of the descriptions of votes can be vague. Lastly, they’re not currently reported in a machine-readable format, so an investor can’t even download the information to a spreadsheet, making the data harder to analyze.
Thus, I support today’s proposal to make the information on Form N-PX more consistent, comparable, and decision-useful for investors. If finalized, today’s rules would bring standardization and usability to this important form, updating it for today’s technologies. Investors will be able to see information tagged by categories, and they’ll be able to access this information in a format that is easy to analyze electronically.
Together, both actions — finishing up the provision on say on pay, and enhancing Form N-PX — will make it easier and more efficient for investors to get crucial information about proxy votes.
 Section 951 of the Dodd-Frank Act added new section 14A to the Securities Exchange Act of 1934 (the “Exchange Act”). Section 14A requires issuers to provide shareholders with a vote on certain executive compensation matters, and it requires certain institutional investment managers to report how they voted on those matters. In October 2010, the Commission proposed rules regarding reporting requirements for managers. See Reporting of Proxy Votes on Executive Compensation and Other Matters, Exchange Act Release No. 63123 (Oct. 18, 2010) [75 FR 66622 (Oct. 28, 2010)]. Today’s proposal takes into account comments received on that proposal.