Polls Show Voters Oppose H.R. 4015? Not Even Close.

October 12, 2018

Last week, ISS and the Council for Institutional Investors (CII) launched a new – and highly flawed – public relations campaign in an effort to defend against the growing concern over practices of the proxy advisory industry and its impact on everyday investors.  In addition to misstatements and factual inaccuracies – all debunked HERE — the new effort relies heavily on a misleading poll from Morning Consult in an effort to claim that voters do not support H.R. 4015, the Corporate Governance Reform and Transparency Act of 2017.

The campaign’s portrayal of the poll misrepresents its actual findings.

Despite what the campaign would have you believe, H.R. 4015 does not allow CEOs and management teams to interfere in corporate voting matters, but rather:

This is a key fact as the provision requiring proxy advisory firms to implement a process by which erroneous data can be corrected or updated is crucial to protect both shareholders and the economy. First, this ensures that the information on which the recommendations are based is accurate. Currently, shareholders have no way to verify that the recommendations being made based on or that their shares are being voted based on accurate information. By requiring the proxy advisory firms to implement a process, H.R. 4015 aims to protect shareholders’ right to fair, accurate information and give companies a means by which they can question the accuracy or analysis of proxy advisory firms’ recommendations.

There have, in fact, been instances in which ISS issued recommendations based on erroneous or misrepresented information. For example, Abbott Laboratories wrote a letter to ISS detailing a number of factual misrepresentations in its analysis and tried to meet with them to address these issues, but ISS continued to ignore them – something that would have been prevented under H.R. 4015.

Second, implementing a standard process ensures there will be enough time for this to take place so that a vote doesn’t have to be decided before the information can be properly reviewed. According to the 2018 Proxy Season Survey from the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, “the amount of time companies were given to respond to recommendations varied” and companies commonly reported that only one to two days lapsed between when recommendations were issued and when votes were held. Some even reported having less than an hour. That is certainly not enough time to give a recommendation proper consideration. Companies must be given “reasonable time,” defined as no less than three business days under the new law, to ensure enough time for true review and consideration.

Bottom line: This poll has more problems than answers. Main street investors want and deserve to know how their money is being voted on based on facts and figures, and H.R. 4015 is a step in that direction.

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