Bob Monks hits out at SEC plans to clamp down on shareholder voting advisers

ISS founder says proxy firms are the only service sector not “suborned” by corporate management.

Bob Monks, the influential corporate governance specialist and founder of Institutional Shareholder Services (ISS), the world’s largest proxy voting firm, has hit out at proposed regulation by the SEC of proxy firms, arguing that they are being targeted because they represent a threat to the “autocracy of the CEO and incumbent boards”.

Legislators in both the US and Europe say they will clamp down on proxy voting advisory firms in the coming months. At the end of 2011, both the SEC and the European Commission said they would rule in 2012 on disclosure of conflicts of interest and transparency of information at proxy firms after seeking industry responses on revised corporate governance rules.
In a New Year blog, Monks who founded ISS in 1985 before selling his interest in the firm in 2004 to the Thomson Group, said the SEC had been swayed by undue corporate lobbying to neuter the influence of the proxy firms: “It is an unhappy commentary on the state of public life in America today that managements have been successful in diverting Congressional and regulatory energies to proxy advisory firms.”Monks said ISS and Glass Lewis, the two largest US proxy voting firms, were the only category of professional service providers, including lawyers and accountants, that had not been “suborned by corporate management”.
He added: “There has been over the last thirty years not a single allegation of proxy advisory firms either accepting bribes or of acting in bad faith.”
He said the scope of activity of proxy advisory firms was small in comparison to the lobbying and regulatory influence stacking up against them: “One: they give advice as to votes on company proxy statements; they have no authority to raise issues on their own – they can only advise on issues raised by others.
Two: there is no compulsion on shareholders to employ the services of proxy advisors firms.
Three: proxy advisors have no power to vote except as expressly authorized by the legal owners.”

Link to Bob Monks’ blog piece