The U.S. Securities and Exchange Commission (SEC) chair said on Tuesday the agency will review shareholder voting rule changes adopted under the administration of former President Donald Trump that have faced criticism for weakening investor power.
Gary Gensler, appointed by Democratic U.S. President Joe Biden, said the regulator would consider drafting a new proposal for overseeing proxy advisers – firms that recommend to investors on how to vote in corporate elections and cast ballots on behalf of some asset managers.
As proxy advisers have grown more influential on hot button corporate governance issues such as climate change, compensation and diversity in recent years, corporate lobbyists have pushed for greater oversight of the firms.
In August 2019, the SEC issued guidance requiring proxy voting firms take more steps to disclose how they craft their shareholder recommendations. The agency also outlined steps that the firms should consider to ensure they are actually voting the way investors designate.
In July 2020, the agency finalized restrictions on proxy advisers by requiring them to show their voting recommendations to public companies at the same time or before sending them to clients. The agency also raised the bar for these firms by mandating they inform their clients of public companies’ responses to their advice.
At the time, Democratic SEC Commissioner Allison Lee voted against the change on the basis that it added “complexity and cost” to the proxy voting system, while investor advocates said the rules infringed on proxy firms’ free speech.
Consumer groups had widely expected Democrats to unpick Trump-era changes on shareholder voting rights.
In March, U.S. Senate Democrats introduced a resolution to rescind an SEC rule that they said would make it harder for shareholders to get issues onto corporate ballots.
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