Legislation introduced by U.S. Rep. Bryan Steil (R-WI) and Ann Wagner (R-MO) would impose new rules on the proxy advisor duopoly.
The lawmakers said their legislation Protecting Americans’ Retirement Savings from Politics Act, would correct issues like a lack of transparency and conflicts of interest which have, they said, tarnished proxy advice and corrupted corporate governance.
“Too often, proxy advisors have encouraged votes that run counter to the economic interests of retirees and seniors. Investment advisors and pension funds should be focused on securing your retirement, not advancing their political agenda,” Steil said. “My bill will bring accountability and transparency to the proxy advisor duopoly and help end the politicization of Americans’ retirement funds.”
The legislation would provide transparency and accountability to the proxy advisory industry, prohibit robo-voting and the inherent conflict of interest associated with consulting services, and require proxy advisory firm clients to issue annual public reports on their proxy voting. The legislation would also require large asset managers to explain how they use proxy advisor recommendations and put their customers’ economic interests first.
The congressmembers said an estimated 70 percent of the outstanding shares in publicly traded U.S. companies are held by institutional investors like mutual funds and pension funds. American families depend on institutional investors to manage those shares, but in order to save costs, many institutional investors rely on proxy advisory firms for recommendations on how to vote the shares under their control.
Two firms – Glass Lewis and Institutional Shareholder Services – jointly manage 97 percent market share. Often the two proxy advisory firms successfully pressure institutional investors to vote contrary to shareholder economic interests in support of political initiatives. This legislation would fix that, Steil said.
Similar legislation was previously introduced by Steil in the 118th Congress.