There’a another comment on the SEC’s proxy advisory proposal from a Chamber of Commerce funded dark money front group. This one was previously focused only on getting corporate-friendly lawyers appointed to the court (they actually argued that it was okay to have all white male nominees because the selections were based on qualifications, ignoring the many candidates rated unqualified by the American Bar Association for having almost no courtroom experience).
The Chamber is really getting desperate now, following the revelations of its efforts to corrupt the notice and comment process at the SEC with fake front groups and phony letters. And so they have deployed one of their other sock puppets, the Committee for Justice. (Remember what we warned you about with vaguely named groups that don’t disclose their funders — they are nearly always about the opposite of what their name wants you to believe.)
Their comment continues the Chamber’s pattern of accusations contrary to the data and recommendations contrary to the law. It is especially appalling that a group describing itself as committed to a Constitutional interpretation of limited government is here hypocritically promoting a “nanny state” notion that a voluntary financial transaction between two highly sophisticated financial professionals must be subject to government restrictions. And it has another classic sign of the sock puppet — citing other sock puppets funded by the same sources without revealing the relationship. Perpetuating the completely discredited claims of “robo-voting” and “outsourcing,” definitively disproved by the data, they are still unable to come up with an example. There are so many sock puppets embedded in this comment that it is more like a sock version of a Russian Matryoshka doll.
The Chamber of Commerce via CfJ tries to perpetuate the false claim that proxy advisors are unregulated. Of the three major firms, one is regulated as an investment advisor, one is regulated as an NRSRO, both extremely restrictive regulatory structures, in addition to other existing legal restrictions that apply to any commercial enterprise. It is telling that CfJ cites the useless “study” from Spectrem (without revealing that it is also funded by the same corporations and executives). The “study” asked investors loaded questions with no statistical validity that are also completely irrelevant to this issue. Do investors want their investment managers to vote in their financial interest? Tear out the front page — the answer is yes! Fortunately, that is what they do, as they must for legal and commercial reasons. CfJ has no evidence that they do otherwise. If they do, we urge them to present it so the SEC can bring actions against the offenders.
CfJ follows a distorted, deceptive, and outright false set of claims with a recommendation. Their idea? Impose the strictest standard ever developed by our legal system, the fiduciary standard, on proxy advisors.
So, let’s talk about the fiduciary standard, which of course already applies to the institutional investors who actually cast proxy votes. It is as a part of the respect for this standard that leads some of them to get proxy analysis and recommendations from the sole source of independent research to make sure they do not succumb to their own conflicts of interest from doing business with portfolio companies. And we will reiterate for the zillionth time that proxy advisors publish reports no one has to buy and recommendations no one has to follow and all but the most routine proxy votes are advisory/symbolic only so even a 100 percent vote is not binding on the company. Just like all of the other comments in support of the rule, CfJ fails to provide a single example to support their claim that there is a problem. Given that 98 percent of CEO pay plans received a majority vote in favor from shareholders, even though ISS recommended a vote against 13 percent, for example, and that 70 percent of ISS clients who delegate voting authority do so under their own proxy voting policies and not those developed by ISS, it would be impossible to do so.
Investment managers who vote proxies are fiduciaries. As we noted in our comment, the SEC has in the past brought actions when investment managers have voted contrary to the interest of the beneficial holders and we encourage them to do so in the future whenever there is a problem. But CfJ — like the other sock puppets funded by CEOs — is unable to come up with a single example of a “wrong” recommendation by a proxy advisory firm or a “wrong” vote. Still, it wants to violate First Amendment protections of speech and the press and basic free market economics by killing the messenger here. Would you try to impose a fiduciary standard on Fox News or the New York Times? We hope not. Could you? Clearly not.
We note that it is also the height of hypocrisy — and chutzpah — for the CfJ to complain about conflicts of interest when it is opaque about its own. They want proxy advisors to disclose the names of those with whom they have a financial connection. Before they impose that on others, they should disclose their own.
Our response to this comment has been filed with the SEC.