House Financial Services Committee Chairman French Hill and Subcommittee on Capital Markets Chair Ann Wagner have sent a letter to the Securities and Exchange Commission (SEC) commending the agency's decision to rescind Staff Legal Bulletin No. 14L. This decision marks progress in the shareholder proposal process under Rule 14a-8, aimed to align with the SEC's mission of protecting investors and maintaining market efficiency.
Hill and Wagner, joined by all Republican members of the Subcommittee on Capital Markets, highlighted ongoing challenges within the Rule 14a-8 framework. They raised concerns about the politicization of the proxy process, which can burden companies and detract from shareholder value. They argue that when proposals are influenced by social and political agendas, they may erode investor confidence and detract from long-term value creation.
The lawmakers also pointed to the influence of proxy advisory firms like Institutional Shareholder Services and Glass Lewis. They claim these firms often issue recommendations that do not account for company-specific circumstances, impacting voting outcomes without sufficient transparency or accountability.
The letter urges the SEC to take decisive action to regulate the proxy advisory process. This includes undertaking a formal rulemaking to address several areas: keeping politics out of proxy statements, eliminating the significant policy exception under Rule 14a-8, increasing resubmission thresholds, enhancing oversight of proxy advisory firms, and ending robovoting practices.
In their call for reform, Hill and Wagner emphasized, "The SEC’s core mission is to protect investors, maintain fair and efficient markets, and facilitate capital formation. The recent rescission of SLB 14L is a commendable action aligned with this mission."
The letter concludes by urging the SEC to build on the latest actions and implement reforms to ensure the proxy process serves all shareholders fairly. The aim is to maintain integrity and competitiveness in U.S. capital markets.
Hill and Wagner appreciated Acting Chairman Mark Uyeda's attention to these issues, expressing a desire to collaborate on reforms to the proxy process.