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As I foreshadowed in my blog last week, on November 5 the SEC voted to issue proposed rules that would apply to proxy advisors. The proposed rules would give companies that are the subject of proxy advice an opportunity to comment on that advice.
For today’s blog entry, I summarize the aspects of the proposed rules that are the most significant:
Proxy advisors would be required to give companies that are the subject of their advice a short period of time (either three or five business days, depending on when the proxy statement was filed) to review the advice and submit feedback on it (conditioned on the company filing its proxy statement at least 25 days in advance of the shareholder meeting).
The SEC indicates that this period would give companies “meaningful opportunities to engage with [proxy advisors] and rectify potential factual errors or methodological weaknesses in the analysis underlying the proxy voting advice before votes are cast.” It also serves to encourage companies to file their proxy statements as early as possible, so that they qualify for the longer review period.
Proxy advisors would be required to provide companies with a “final notice of voting advice” that includes any changes made as a result of the review and feedback period. This ensures that companies have access to the voting advice distributed to their investors. This final notice would have to be delivered to the company at least two business days before it is distributed to investors.
Companies would be able to request that proxy advisors include a link to a company statement in the advice distributed to investors. This statement would enable the company to express its views on the advice.
Companies can currently file supplemental proxy materials with the SEC to address advice issued by proxy advisors, but there is no guarantee that investors will become aware of these additional filings in advance of voting. Including a hyperlink in the actual advice distributed to investors hopefully ensures that investors are at least aware of the company’s statement.
The proposed rules also do the following:
Is this finally the opportunity you’ve been waiting for to tell ISS what you think of their advice? Take my poll below to let me know what you think of the SEC’s proposal:
If the poll doesn't appear, click here to vote.
Comments can be submitted on the proposed rules for 60 days after the proposal is published in the Federal Register (which I don't think has happened yet, but I find it challenging to navigate the register, so I could be wrong).
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