Proxy Advisory Reform: Legislation Update

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In recent years, Nasdaq has been active in addressing the lack of transparency and conflicts of interest of proxy advisory firms. We have been a vocal supporter of the Corporate Governance Reform and Transparency Act of 2016 and are pleased that Congressman Sean Duffy (R-WI) has just reintroduced the bill in 2017. H.R. 4015 would require the proxy advisory firms to register with the SEC and engage with issuers in a more responsible and transparent manner.

One important note about Rep. Duffy’s bill: A new provision of the bill would give issuers an additional tool in their dealings with the proxy advisors. This provision would require the proxy advisory firm to include a statement from the company in any final report where the company has a complaint or factual disagreement about the proxy firm’s conclusions.

While proxy advisory firms wield enormous influence over the corporate governance landscape, their methods are not transparent, and they are rife with conflicts of interest. Our 2017 Nasdaq-Chamber Proxy Season Survey results show that while there has been a modest increase in communication between companies, proxy advisory firms and shareholders, many issues remain.

We believe proxy advisors must have a line of communication with the companies they analyze, and clear transparency around ownership of, or short interest in, covered companies. The Duffy bill will help even the playing field for issuers.

Proxy reform is a key component of our Revitalize blueprint, and we remain dedicated to working with policy makers as H.R. 4015 moves through the legislative process.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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