January 9, 2019
In an email yesterday, NASDAQ announced that over 100 companies have already signed its letter penned by Nelson Griggs, President of NASDAQ, advocating for proxy reform. Griggs first called on companies to add their name to the letter last month. In the letter, NASDAQ listed several pain points within the proxy process that it hopes the Securities and Exchange Commission (SEC) will amend, including conflicts of interest, lack of transparency surrounding how recommendations are reached, and instances of inaccurate or factually incorrect proxy recommendations. NASDAQ reminded companies that they can still sign on through the end of this month.
NASDAQ’s letter is part of its broader effort to reform public markets in America. NASDAQ worries that fundamental structural weaknesses at the heart of the U.S. equities markets are contributing the alarming trend of declining IPOs. One of these structural weaknesses is an onerous proxy proposal process that places undue burdens on companies. Faced with an opaque system that gives companies little chance to engage with proxy advisors and shareholders on faulty recommendations, companies are increasingly choosing to avoid the hassle and remain private. As less and less companies go public, retail investors are faced with a shrinking number of investment options.
Proxy reform offers an opportunity to buck this trend. SEC Chairman Jay Clayton has said that exploring the proxy advisory system is a “significant initiative” for 2019, indicating the agency will continue its reform efforts (that culminated in a roundtable on the proxy process last November). The broad support NASDAQ’s letter has amassed in the past several weeks signals both widespread backing of the NASDAQ’s reform agenda and a desire to continue the conversation. Once published, the letter will join dozens of other comments calling for proxy process reform that have poured into the SEC’s proxy process docket.