CII Letter to DOL/EBSA on the Proxy Voting Proposal

The Council of Institutional Investors has filed a comment objecting to the proposed rule form DOL/EBSA on proxy voting by ERISA fiduciaries. The full comment is below. An excerpt [footnotes omitted]:

DOL has not provided a persuasive rationale for the Proposed Rule. In fact, the Proposed Rule is premised on fundamentally flawed assumptions about shareholder proxy voting, fiduciaries’ understanding of their duties, and the investment marketplace….Despite the importance of shareholder proxy voting, DOL concludes – without documenting a thorough review of the research – that the evidence on the effectiveness of proxy voting is “mixed.” In that regard, we call DOL’s attention to the following findings, all of which indicate that shareholder proxy voting can, in fact, enhance shareholder value:

  • Shareholder resolutions can offer additional insight into emerging material risks and externalities for issues, as well as management responsiveness;
  • Shareholder adoption of governance-related shareholder proposals was found to trigger positive short-term returns as well as long-term performance improvements;
  • Adoption of majority voting was associated with positive abnormal returns and an increase in boards implementing majority-supported resolutions;
  • “Say on pay” was shown to lead to increases in companies’ market value and improvements in long-term profitability;11 and•Even if it were true that the research on proxy voting is mixed, that does not lend support for a new rule that effectively discourages proxy voting by plan fiduciaries. Instead, fiduciaries should be afforded the flexibility to make their own prudent determinations about the efficacy of proxy voting overall and in particular circumstances.

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