Two members of the IAC subcommittee have filed supplemental comments, Harvard Law Professor John Coates and Consumer Federation of America’s Barbara Roper.
The full comment is below. An excerpt:
The SEC’s proposal on proxy advisors treats them as the most important actors in the proxy system outside of corporate managers. In fact, the largest fund complexes – Vanguard, BlackRock, Fidelity, etc. – now control directly more votes than the total votes that the major proxy advisors have ever been shown to have influenced with recommendations. Those complexes have in-house corporate governance staffs that engage with companies and oversee voting of shares on behalf of millions of Main Street investors. If one or both proxy advisors were shut down – and there is some risk that the SEC proposals may lead to just that result – corporate managers would continue to face the difficult and challenging task of convincing large fund complex governance staff to see strategy, policy and governance their way, just as they do today. The way those complexes vote will continue to have an outsized and growing influence on how shares are voted….[W]e believe the SEC’s economic analyses for these proposals in the rule releases are insufficient and fail to adhere to the SEC’s own self-adopted and published guidance on the topic. We want to emphasize that – consistent with that guidance – it would be an arbitrary and indefensible process failure for the SEC to propose a rule, include fundamentally lacking economic analysis in the release, and then, having that lack pointed out to the SEC, fail to republish the proposal with the analysis included, but instead proceed to adopt a rule, even if better or more compliant economic analysis is included in the final rule release. The reason is straightforward: the economic analysis is necessary for the public to understand the purposes and fit between the rule proposal and its intended effects. For economic analysis to be added belatedly in a final rule release as a kind of rationalization and decoration does not comply with the SEC’s own self-adopted guidance on how and when economic analysis should be used and included in rule releases.