The New SEC Proxy Rules Will Redefine American Capitalism: Let’s Debate Them
This article originally appeared on ProMarket, the blog of the Stigler Center at the University of Chicago Booth School of Business, on November 14, 2019.
On November 5, the Securities and Exchange Commission proposed new rules on how proxy advisor can express their opinions and on how shareholders can make proposals.
These two proposals are subjected to a 60-day public comment period.
The SEC approved the new rules with a 3-2 vote. Commissioners Robert Jackson and Allison Herren Lee voted against their colleagues’ proposal. In Jackson’s view, the new regulation “simply shields CEOs from accountability to investors. Whatever problems plague corporate America today, too much accountability is not one of them.”
Investors who lack time and money to get direct information on the company they own shares in usually hire proxy advisors who make recommendations about how shareholders should vote. With the new rules, proxy advisors will have less room to maneuver, and voting against managements’ preferences will be much more difficult. Firms recommending a vote against executives must now give their analysis to firms’ managements and are exposed to a risk of federal litigation on methodology.
New limits on re-submissions of proposals previously blocked by a majority of shareholders will remove key CEO accountability measures from the ballot for years.
According to Reuters, the new regulation is “one of the biggest wins for the corporate lobby under President Donald Trump.”