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SEC Staff Releases Guidance on Proxy Advisory Firms – Long Wait with Little Impact
July 29, 2014

On June 30th, the U.S. Securities and Exchange Commission (SEC) released a staff legal bulletin, regarding proxy voting and the use of proxy advisory firms by institutional investors and registered investment advisers.  Specifically, in an attempt to enhance transparency, minimize potential conflicts of interest and avoid a widespread overreliance on proxy firms by institutional investors, the bulletin provided guidance about investment advisers’ responsibilities in voting client proxies and retaining proxy advisory firms.

magnifying glassProfessional organizations like NIRI have long urged the SEC to more closely regulate proxy advisors and their reports, which have often been criticized for perceived inaccuracies, being unclear and often offering “one-size-fits-all” voting guidelines, although this staff bulletin offers investment managers limited guidance and nothing more.  NIRI also believes that the “widespread use of proxy advisory services by institutional investors has resulted in these firms having a significant impact on shareholder voting. However, proxy advisory firms remain largely unregulated, and are not fully transparent about their methodologies and decision-making processes.”

So, what does the recent SEC guidance really mean for public companies in the proxy process? As you prepare for a significant shareholder vote the key as always is maintaining good relationships with your active shareholders. For proxy voting, our research has shown that the majority of buy-side institutions can have an impact on final voting responsibility. The legal and/or proxy department is also involved, but make no mistake–your primary contacts will have a say and their words will have weight. The onus remains on the Company’s IR team to keep the lines of communications open so at voting time, no one gets a nasty surprise!

Joe Calabrese and Scott Eckstein bring a wealth of experience to MWW’s Financial Communications practice.

Joe Calabrese is a Senior Vice President with approximately 20 years of investor relations experience. Working closely with publicly-traded and private companies, Joe provides strategic counsel, message and collateral materials development and has in-depth experience assisting IPOs, M&A transactions, restructurings, restatements, analyst days and management changes.

Scott Eckstein is a Director of Account Services at Financial Relations Board and brings over 15 years of experience in financial communications both in agency and corporate roles. Scott has worked with a number of companies developing integrated communications programs as well as developing targeted institutional and retail branding campaigns. He has also provided advisory services for a variety of small- to large-cap companies.

Posted by jcalabrese on July 29, 2014 at 2:45 pm

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