Institutions

US Chamber of Commerce to take “in-depth” look at proxy advisors

Latest pressure on advisors to institutional investors

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The US Chamber of Commerce, the business lobby group, is to take an “in-depth look” at the influence of proxy advisory firms at an event in Washington next month.

The Chamber’s Center for Capital Markets Competitiveness is holding a half-day event on December 5 focusing on the “influence of proxy advisors and the state of corporate governance in the US”.

The event – Examining the Role of Proxy Advisory Firms – is the latest example of pressure being brought by the business community on proxy firms.

In January, a group called The Shareholder Communications Coalition wrote to Securities and Exchange Commission Chairman, Mary Schapiro, urging the regulator to clamp down “as soon as possible” on shareholder proxy voting advisory firms, saying they are “unregulated and unsupervised”.

Bob Monks, corporate governance pioneer and the founder of leading proxy firm Institutional Shareholder Services, has called such efforts an “ugly sign of the times”. He points out that the firms provide advice which investors are under no obligation to either buy or use.It follows a successful legal case brought by the Chamber and the US Business Roundtable last year against the SEC over a technicality on proxy access, or the ability for shareholders to nominate directors at companies.
“Proxy advisory firms’ role in corporate governance has expanded drastically over the past several years, most notably through the 2010 Dodd-Frank Act’s requirement of mandatory Say-on-Pay,” the Chamber says about the planned event.

It says this increased institutional shareholders’ reliance on the firms’ recommendations and “further cemented those firms’ status as de facto corporate governance standard setters”.

The meet will bring together business leaders, experts and other key stakeholders. It will look at the relationship between shareholder value, institutional investors’ fiduciary duty and look at “what can be done to restore balance to this important piece of our capital markets structure”.