CLS Blue Sky Blog

SEC Commissioner Roisman Offers Remarks at Proxy Roundtable

Good morning and thank you to the Divisions of Corporation Finance and Investment Management for organizing this roundtable. I hope that everyone here will take this opportunity to engage in a thoughtful, meaningful discussion on the proxy process. If the process were perfect, we would not be here today. The topics on the agenda have the tendency to get emotional. Trust me, we know where most, if not all, of you stand on the issues. You have a platform today and I hope you use it to provide us with specific examples, data, and facts rather than generalities or anecdotes. With the knowledge you gather today, you can then submit data to the comment file based on these discussions. We look forward to these submissions and your suggestions on how the SEC can make changes to improve the process.

The first panel today will address the proxy voting process and technology. While this topic is very broad and the panel very large, I hope that you will get the chance to address a few subjects that I think are very important to the proxy voting process.

The second panel today will focus on shareholder proposals. I want to stress the importance of shareholders being able to engage with management of companies, and not just in the context of annual meetings. Shareholders are the owners of a company and have the right for their voices to be heard. Shareholder proposals are a means for long-term shareholders to engage with both management and other shareholders. Sometimes, this right to vote is not enough for certain shareholders to express their views or displeasure about a topic, such as in instances when the board is unaware of a matter important to shareholders or unwilling to bring that matter to a vote. We have to strike a balance, though, between proponents who seek to increase shareholder value with their proposals and those who exploit the process to further their personal agenda. Proposals brought by the latter can be a waste of shareholders’ time and money, as it is the shareholders who ultimately bear the costs companies spend defending these proposals.

One area that I would encourage participants to discuss is the eligibility requirements for shareholder proposal submissions and resubmissions. The Commission last considered the thresholds for shareholder proposal submissions and resubmissions in 1998, and we have no economic analysis to support the current thresholds.[3] A lot has changed in twenty years, and I think it is appropriate for us to consider whether these thresholds are still appropriate and to do so in a reasoned way.

The last panel will discuss proxy advisory firms, which have increasingly played a central role in advising fund managers on how to vote proxies and thereby influencing outcomes for fund investors. Given this role, I believe the SEC, fiduciaries that use their services, and members of the shareholder-voting ecosystem must assess how these firms operate and manage conflicts of interest.

Finally, fund managers have evolved to play an outsized role in voting proxies — particularly managers of diversified passive funds, which hold shares in thousands of public companies on behalf of millions of Main Street investors. These investment advisers have a fiduciary duty to the funds they advise. I hope the panels today, and subsequent comment letters, will discuss how they are, or should be, fulfilling this duty in the context of proxy voting.

I look forward to hearing everyone’s suggestions for improvement, and I ask that you keep in mind when you ask for change that the SEC must take a balanced approach to rulemaking. Any changes that we make must promote capital formation, promote market integrity, and protect investors.


[1] See NYSE Rule 452 and Section 952 of the Dodd-Frank Wall Street Reform Act of 2010.

[2] Regulation Best Interest (Proposed Rule), File No. S7-07-18 (Apr. 18, 2018).

[3] See Exchange Act Release No. 34-40018 (May 21, 1998) (adopting), where the Commission increased the dollar value of a company’s voting shares that a shareholder must own in order to be eligible to submit a shareholder proposal but decided not to adopt the proposed increase to resubmission thresholds.

[4] Staff Legal Bulletin No. 14I (CF) (Nov. 1, 2017).

[5] According to the ISS website: “For determining which companies are eligible for a draft review, ISS generally uses the S&P 500 constituent list as of January 31st for annual meetings occurring during the following proxy season.” Available at

[6] Some guidelines appear arbitrary, or at least untethered to legal requirements or metrics. For example, ISS’ guidelines state that it generally favors voting for resolutions that require disclosures on Climate Change/Greenhouse Gas Emissions without mentioning any legal requirements on companies to do so, value justifications, or thresholds of materiality to investors. See, e.g., ISS’ United States Proxy Voting Guidelines, at 57 (guidelines generally favor voting for resolutions requiring disclosures on Climate Change/Greenhouse Gas (GHG) Emissions with no mention of whether this information is material to investors). Other guidelines I have seen actually appear to undermine legal authority. Glass Lewis’ 2019 Proxy Paper Guidelines state that it will make note of instances where a public company has successfully petitioned the SEC to exclude shareholder proposals and potentially recommend against members of the company’s governance committee. See, e.g., Glass Lewis’ 2019 Proxy Paper Guidelines, at 29 (“Glass Lewis will make note of instances where a company has successfully petitioned the SEC to exclude shareholder proposals. If after review we believe that the exclusion of a shareholder proposal is detrimental to shareholders, we may, in certain very limited circumstances, recommend against members of the governance committee.”).

These remarks were delivered by Elad L. Roisman, a commissioner of the U.S. Securities and Exchange Commission, on November 15, 2018, at the 2018 SEC Staff Roundtable on the Proxy Process.

Exit mobile version