This briefing provides an update for signatories on legislative and regulatory proposals under discussion in the US regarding the shareholder voting process, ESG integration and the role of proxy advisory firms.

On November 15, 2018, the Securities and Exchange Commission (SEC) will host a roundtable discussion on possible regulatory changes to the shareholder voting process. The official agenda for the roundtable is forthcoming. However, in a July speech announcing the roundtable, SEC Chair Jay Clayton asked SEC staff to consider topics including the regulatory framework applicable to proxy advisory firms and whether the SEC should increase the required level of support that a shareholder proposal must receive for the proponent to resubmit it the following year.

This briefing is intended to support signatories in submitting comment letters to the SEC in advance of the roundtable. For further questions or comments, contact

Shareholder voting process threatened 

Discussions are underway in Washington, D.C. to change the shareholder voting process. Concerned about the growing influence of investors in the shareholder voting process, targeted proposals are advancing at the SEC and in Congress.

Currently, the SEC is considering a number of possible regulatory changes to the proxy voting process. The SEC is holding a formal conversation on “whether proxy rules should be refined” at a November roundtable on the proxy process. Topics for discussion and eventual regulation include giving individual retail investors more authority to dictate their votes, increasing the thresholds for minimum ownership to submit a shareholder proposal, and limiting the ability to resubmit a shareholder proposal, among others.

Although the outcomes of the discussion are uncertain, regulatory changes are likely. SEC Chair Jay Clayton has publicly stated his support of changes to the proxy voting process. Notably, the SEC recently broke from protocol by rescinding two guidance letters on proxy voting. These letters, issued in 2004, provided assurances on the ability of institutional investors to use proxy advisory firms for voting recommendations. In the past, the SEC would be expected to wait to act until after the roundtable, allowing an opportunity for interested parties to provide input.

Details on recent SEC action

On September 13, 2018, the SEC rescinded two of its previously-issued guidance letters on proxy voting. While the law allowing the use of proxy advisory firms for recommendations is still in effect, SEC Chair Jay Clayton states that the withdrawal of the letters is meant to “facilitate a discussion” in advance of the November roundtable. An SEC roundtable is best viewed as a step in the regulatory process aimed at building a public record on a given topic. While roundtables are not necessary for regulatory reform, they often result in some action, whether as simple as further study or more significant action such as enhanced enforcement of existing rules, new proposed rules, or even prompting of Congressional action to change SEC authorities. For this reason, the roundtables should be followed closely by those interested in the proxy process.

The shareholder voting process, ESG integration and proxy advice in the US