Proxy Process and Advisors Face Back-to-Back Hearings in House Financial Services Committee

In July, two House Financial Services Subcommittees heard testimony on issues related to the proxy voting process and the oversight of proxy advisory firms. The Subcommittee on Capital Markets held a hearing entitled, “Reforming the Proxy Process to Safeguard Investor Interests.” The hearing examined several pieces of legislation ranging from shareholder proposals, voting policies, and proxy solicitation materials. In her opening statement, Subcommittee Chairman Ann Wagner (R-MO) noted “For our public markets to remain focused on long-term shareholder value, it is crucial to reform the proxy process to reduce the financial burdens on small and mid-sized companies and minimize distractions for management.”

On the same day, the Subcommittee on Oversight, chaired by Representative Bill Huizenga (R-MI) held a hearing entitled, “Oversight of the Proxy Advisory Industry.” The hearing included testimony from Glass Lewis and Institutional Shareholder Services (ISS) officials. In his opening remarks, Chairman Huizenga stated, “proxy advisor firms have hijacked the shareholder process, becoming the de facto standard setters for corporate governance policies in the U.S.” The hearing focused on the recommendations Glass Lewis and ISS make, how these are formulated, and the weight such recommendations have with shareholders.

Democrats pushed back against the Republican characterization of shareholder proposals and the proxy process, stating, “For a party that supposedly values free speech and free market capitalism, they are now trying to muzzle the ability of shareholders to bring forth proposals that can influence the direction of the companies they own.” The hearings were held as part of a broader push from the Committee to focus on ESG-related concerns in financial markets.

Click here to watch the Subcommittee on Capital Markets’ hearing covering the proxy process.
Click here to read Chair Wagner’s opening remarks at the hearing.

Click here to watch the Subcommittee on Oversight’s hearing on proxy advisor oversight.
Click here to read Chair Huizenga’s opening remarks at the hearing.