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Statement on Proxy Voting Advice

Nov. 17, 2021

Thank you to the staff in the Division of Corporation Finance, Division of Economic and Risk Analysis, and the Office of the General Counsel for their exceptional and thoughtful work in advance of today’s meeting.

The proposal before us, in part, addresses concerns raised by investors who utilize proxy voting advice.[1] Specifically, concerns that the existing framework jeopardizes the independence of proxy voting advice and makes the conveyance of that proxy voting advice to investors costlier and subject to delay.[2] This proposal, among other things, solicits comment on removing the obligation that Proxy Voting Advice Businesses (PVABs) must (1) make their voting advice available to the corporation the advice is about at or prior to the time they disseminate it to their clients; and (2) to inform their clients when a corporation responds to that advice.[3] Investors who engage PVABs have consistently commented that such conditions inhibit the independence of proxy voting advice by increasing a corporation’s involvement in a PVAB’s advice.[4]

Proxy voting advice is integral to our current system of corporate governance and shareholder democracy. And the independence of that advice is essential. Independent advice informs and empowers investors’ voting decisions. Without it, investors have even less say in a structure with inherent information asymmetry that can disadvantage them. Corporations have, or at least should have, a deep and nuanced understanding of their own affairs. It is their job. Investors, the owners of the company, usually do not. And it is demonstrated that monitoring management to approximate anything close to that level of insight is difficult and costly.[5] Therefore, strengthening independence and ensuring that the costs of voting advice are not prohibitive are important objectives.[6]

I look forward to reviewing the comment letters and working with the staff as this rulemaking progresses. Thank you.

[1] See Proxy Voting Advice, Release No. 34-93595 at 8 (proposed Nov 17, 2021) [hereinafter Proposing Release].

[2] See, e.g., Proposing Release at n. 23-25 with accompanying text.

[3] See id at n. 21-25 and accompanying text.

[4] See Proposing Release n. 23-25 and accompanying text.

[5] See Paul H. Edelman, Randall S. Thomas & Robert B. Thompson, Shareholder Voting in an Age of Intermediary Capitalism, 87 S. Cal L. Rev 1359, 1383-92 (2014) (noting that gathering the information to formulate an informed vote is high for shareholders and that the gains from most governance issues are small and dispersed despite the high costs of information gathering, further a shareholder must do this for each portfolio company). Further, simply monitoring the issues in a portfolio of companies during a given proxy season is a large task. See Recommendation of the SEC Investor Advisory Committee (IAC) Relating to SEC Guidance and Rule Proposals on Proxy Advisors and Shareholder Proposals at 15 (Jan. 24, 2021) (“[Proxy advisors] distill hundreds of pages of information in proxy statements down to a much smaller number of pages in a consistent format that is easy for clients to digest. These clients have to vote hundreds or even thousands of proxies per year…[it is] virtually impossible for those with voting authority to engage in a de novo review of the entirety of the information provided to them by companies, dissidents and others commenting on the votes. In short, proxy advisors are necessary for a large number of shares to be voted on an informed and timely basis.”).

[6] While the role of proxy advisors in shareholder democracy has been widely debated in many circles, voting advice from professional advisors provides a counter-weight to the views and positions of management.

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