Community Corner

Senate Hearing Focuses On Regulation Of Proxy Advisory Firms

Recently, the Senate Committee on Banking, Housing and Urban Affairs held a hearing on various legislative proposals aimed at improving corporate governance, including the Corporate Governance Reform and Transparency Act, H.R. 4015, that would regulate the activities of proxy advisory firms like Institutional Shareholder Services (ISS) and Glass Lewis.

This hearing is the latest step in the legislative process, following the House of Representative voting 238-182 on December 20, 2017 to send H.R. 4015 to the Senate for consideration. It is not yet clear that the Senate will move the legislation from the Committee to the full Senate, or whether the Committee will make significant amendments requiring a second vote from the House to endorse those changes, or some compromise to harmonize those differences. Moreover, any movement on H.R. 4015 in the near term seems unlikely, given the Senate’s focus on confirming President Trump’s nominee for the Supreme Court and on the mid-term elections.

According to a fact sheet published by Rep. Sean Duffy (R-Wis.), the House Bill’s sponsor, “H.R. 4015 would require Proxy Advisory Firms to register with the SEC and disclose among other things, the procedures and methodologies to develop proxy voting recommendations and any conflicts of interests.” The fact sheet also mentions that “In doing so it would grant companies sufficient time to respond to voting recommendations and require that firms demonstrate their capabilities to provide fair and accurate recommendations.”

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