Not so Veritas: Wachtell Lipton on Proxy Advisory Rules

We do not always agree with the “Compensation in Context” newsletter from Veritas compensation consultants but we usually find it informative and credible. The decision to turn over the newsletter to a piece of advocacy from a law firm that represents entrenched corporate managers, spending decades trying to cut off meaningful oversight from shareholders, is behind a memo from Wachtell Lipton purporting to be an objective statement about SEC regulation of proxy advisors when in fact it is a wildly unbalanced piece of advocacy.

For the authors to insist that the SEC rule rushed through in the last weeks of the Trump administration and passed through a party-line divided vote was the result of years of consideration is simply untrue. The Commission did consider regulating proxy advisory firms over many years and repeatedly decided it was not necessary beyond the considerable regulations already in effect. The late 2020 rule was fundamentally flawed as we and others have pointed out and as he Commission has made clear in its subsequent rescission of most of the rule’s pernicious and unsupportable provisions.

The one thing we would expect from a compensation consultant would be an understanding of incentives. At a very minimum, the inclusion of this piece should acknowledge that the firm’s clients have paid them to take this position.

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