As proposed, the rule would give all public companies authority to review proxy analyst opinions and recommendations prior to their dissemination to clients and investors. It also would force proxy analysts to include a target company’s rebuttal to any negative vote recommendations within the analysts’ own reports.
The intended consequences of this are stated as clarity and truthfulness of proxy recommendations. We feel the unintended effects of this are far more serious.
First, this process of preclearing analysis and recommendations would be a clear violation of long-standing professional standards of analyst independence set nearly two decades ago. The specific point was to address analysts’ conflicts of interest in their dealings with issuers. Not only does this new proposal subvert analyst independence, it very clearly violates the right of investors to contract for such independent advice services. We would go so far as to say it infringes on free speech.
The proxy process is the heart-beat of shareowner rights and key to a balanced corporate governance system. Honest and unfettered analyses and opinions from expert proxy analysts have become essential to this framework. We should never confuse proxy-voting analyses and recommendations that the target company doesn’t like with fraudulent or misleading facts as the issuer community would have us believe.