Rep. Bryan Steil
In an attempt to limit the control of proxy advisors, U.S. Rep. Bryan Steil (R-WI) on Tuesday led 12 of his Republican colleagues in introducing legislation that would require proxy advisory firms to register with the Securities and Exchange Commission (SEC).
“Washington’s reckless spending has already harmed Americans’ retirements. We don’t need woke political actors harming Americans’ financial futures,” Rep. Steil said. “We need to empower investors, restore transparency and accountability, and enhance competition.”
The current market for proxy advisory firms — which are principally in the business of advising institutional investors about upcoming shareholder votes — is 97-percent controlled by a duopoly consisting of privately owned Glass Lewis and German-owned Institutional Shareholder Services, also known as ISS.
Rep. Steil on Jan. 24 sponsored the Putting Investors First Act, H.R. 448, with a dozen colleagues who signed on as original cosponsors, including U.S. Reps. Andy Barr (R-KY), Mark Amodei (R-NV), Dave Joyce (R-OH), and French Hill (R-AR), to rein in proxy advisors and limit their influence over American corporate governance by restoring key safeguards that would protect investors and prioritize shareholder returns.
“The Woke Left is using your retirement funds to advance their radical agenda,” said Rep. Steil. “My bill puts a stop to the woke attack on American capitalism.”
According to information provided by Rep. Steil’s staff, the market dominated by the two proxy advisory firms successfully pressure institutional investors to vote contrary to shareholder economic interests and in support of “woke political initiatives.”
Both firms make more money if there are more shareholder proposals and, as a result, they are incentivized to encourage and/or vote for activist proposals, the information says, which notes that Glass Lewis and ISS also do not bear any costs and have no accountability for their recommendations.
If enacted, H.R. 448 would require proxy advisory firms, or any other firms providing voting advice, to demonstrate that their vote recommendations are in the best economic interest of shareholders, according to a bill summary provided by Rep. Steil’s office.
Additionally, the bill would require SEC registrants to update their information promptly if anything previously submitted to the SEC becomes materially inaccurate and to be annually recertified, and, among numerous other provisions, would provide a process for the SEC to censure, deny, or suspend the registration of a proxy advisory firm for noncompliance or for association with a person convicted of a criminal offense.
The National Association of Manufacturers and the U.S. Chamber of Commerce endorsed H.R. 448, which has been referred to the U.S. House Financial Services Committee for consideration.