Amid growing scrutiny of proxy advisory firms and concerns about their influence over corporate governance matters and the potential for conflicts of interest, the Securities and Exchange Commission has issued new guidance. The slate of 13 questions and answers from the Division of Corporation Finance and Division of Investment Management addresses conflicts, the application of previous disclosure exemptions, and the use of these firms by investment managers voting on behalf of clients.
Proxy advisory firms, including market leaders ISS and Glass Lewis, have increasingly come under fire by business groups, notably the U.S. Chamber of Commerce, critical of what they see as outsized influence in governance matters and conflicts that may arise when they repackage and sell research (ISS also has a consulting arm that is separate from its advisory services). SEC commissioners Michael Piwowar and Daniel Gallagher have repeatedly raised similar concerns in public comments and speeches. In December, the Commission held a day-long roundtable where participants discussed these matters.
