2020 Proxy Season Survey Finds Vast Majority of Companies Willing to Participate in Proxy Process
Nasdaq and the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC) released their annual proxy season survey, which revealed that public companies are willing to participate in U.S. regulator’s proxy process, specifically welcoming the ability to “review and comment” on draft proxy advisory firm recommendations. The survey, which is in its sixth year, aims to help policymakers and the general public understand the relationship between public companies and proxy advisory firms.
According to this year’s report, which surveyed 182 companies, a vast majority of the companies said they are aware and support the U.S. Securities and Exchange Commission (SEC) rulemaking related to proxy advisory firms, with 97% saying they would make themselves available to “review and comment.” Furthermore, 85% of companies surveyed said that such a mechanism would not create unnecessary delays or confusion in the proxy voting process.
As the survey notes, proxy advisors play a critical role within the corporate governance ecosystem, analyzing and issuing voting recommendations for institutional investors. Still, the proxy advisory system has serious flaws pertaining to responsiveness and transparency.
This year’s survey found that companies still struggle to communicate with proxy advisory firms, with just 7% of issuers requesting previews of vote recommendations, extending a declining trend from 2019. For companies that asked to meet with proxy advisory firms relating to matters subject to a shareholder vote, their request was denied 69% of the time. Moreover, only 44% of companies believe that proxy advisory firms carefully research all aspects of an issue.
The SEC has started to address these issues, finalizing a rule earlier this summer to make the proxy advisory industry more transparent and enhance the quality of vote recommendations received by institutional investors.
“As a public company, and on behalf of thousands of public companies on our market, Nasdaq believes the SEC’s proposed reforms would facilitate a more effective and transparent process, based on the absolute bedrock of accuracy, for investors and companies as they utilize the services of proxy advisory firms,” said Ed Knight, Vice Chairman, Nasdaq. “The strength of the U.S. public markets is vital to economic resilience, and we look forward to continuing our work with issuers and regulators to best serve shareholders, while ensuring greater protection and access of all investors.”
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