Washington – Testifying today on behalf of the Business Roundtable-led Shareholder Communications Coalition, Niels Holch, Executive Director of the Coalition, told members of the House Subcommittee on Capital Markets and Government Sponsored Enterprises that the Securities and Exchange Commission (SEC) must reform the shareholder communications and proxy voting system to enable direct communications with shareholders, improve transparency and accountability and ensure that shareholder votes are verifiable and auditable.
“The U.S. proxy system is complicated and multi-faceted, involving several layers of intermediaries who are not the economic owners of corporate shares.
“Public companies are understandably frustrated by a shareholder communications system that prevents them from knowing who many of their shareholders are and effectively communicating with them. Under the current structure, companies seeking to encourage more voting participation by beneficial owners, and engage in dialogue with them, cannot do so without using a complicated, circuitous and expensive process that is largely outside their control.
“Proxy voting should be fully transparent and verifiable, starting with a list of beneficial owners eligible to vote at a shareholder meeting and ending with the final tabulation of votes cast at the shareholder meeting. The vote counts on matters before a shareholder meeting should be auditable and capable of third-party verification, so that a validation of the votes of all shareholders can occur.&rdquo
Holch also expressed concern about the role of proxy advisory firms that often do not share information with the companies whose shareholders they are advising and may be basing advice on inaccurate information. “…[T]hese firms should be subject to more robust oversight by the SEC and the institutional investors that rely on them,” testified Holch.
Holch concluded by noting that it has been more than 25 years since the SEC’s shareholder communication rules have been updated. He urged Subcommittee members to request that the SEC turn its attention to reforming shareholder communication and proxy voting and addressing the role and regulation of proxy advisory firms.
Click here to view the full testimony.
Click here to read Business Roundtable’s Principles of Corporate Governance, which include principles for shareholder communications and access to proxy materials.