Bipartisan Senate Bill Would Regulate Proxy Advisors

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Six U.S. senators on Wednesday introduced a bill that would require the U.S. securities watchdog to directly regulate firms such as Glass, Lewis & Co and Institutional Shareholder Services, which advise investors on how to vote in corporate elections.

The bipartisan bill comes as corporate lobbyists, including the U.S. Chamber of Commerce and the National Association of Manufacturers, are campaigning to rein-in “proxy advisers,” which they say have too much sway over corporate democracy.
The role of the role counselors is part of a wider debate on how to improve governance in US companies, as it faces increasing pressures to take into account issues such as financial crises, investors, climate change and employee diversity.

Proxy advisors generally support shareholder suggestions on these issues, and conflict with the company’s management views that companies have effectively taken over the board of directors. They say the supervisors should be arranged in a way similar to the rating agencies.

In particular, they complain that firms are potentially conflicting; Because Glass offers consulting services to the same companies that it gives voting recommendations, Glass Lewis belongs to the Ontario Teachers’ Pension Plan, a largely activist investor.

Corporate Governance The Law on Justice will require the US Securities and Exchange Commission to direct its advisor advisors under the Investment Advisory Law. This will be subject to periodic SEC reviews of firms, which will involve a serious review of firms’ conflict of interest policies.

SEC and Glass Lewis did not respond to comment requests immediately.

A spokesman for the ISS said the company continues to believe that additional federal legislation is not necessary.

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