Sunday, December 20, 2020

Compliance with the DOL's New Proxy Rules May Stump ERISA Fiduciaries

A counter-revolution in ESG Investing?

Author: David Schwartz

On Friday, December 11, the Department of Labor (DOL) issued its final rules on proxy voting by ERISA fiduciaries. As proposed last August 30, the draft rules drew hundreds of responses by the ESG-directed investing community, many of which criticized as unworkable the DOL proposal. The final version of the rules eliminates the need for plan sponsors to weigh the economic vs. non-economic effects before casting their proxy votes. Yet that softer, principles-based approach may itself create compliance problems for ERISA fiduciaries -- and may not even survive the first hundred days of the Biden administration.

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Tuesday, January 27, 2015

SEC Announces February 19 Proxy Roundtable

Author: David Schwartz
Today, the Securities and Exchange Commission announced that it will hold a February 19 public roundtable discussion on improving the proxy voting process. The roundtable, which will be held at the SEC’s Washington, DC headquarters, will focus on universal proxy ballots and retail participation in the proxy process.
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Tuesday, July 22, 2014

Should Pension Funds Police Corporate Governance?

Author: David Schwartz

It is often said that good corporate governance helps reduce a company’s investment risk, ensures the effective deployment of shareholder capital, and ultimately contributes to the long-term performance of public companies. . . On the other hand, the absence of a robust corporate governance infrastructure can lead to poor decisions resulting in bad outcomes for the company and its shareholders. 

SEC Commissioner Luis A. Aguilar has long been a champion of empowering shareholders to enforce sound corporate governance.  In a July 1, 2014 address before a meeting of the Latinos on Fast Track (LOFT) Investors Forum, Commissioner Aguilar once again addressed the role pension plans and other institutional investors play in ensuring that the companies they invest in make sound governance decisions.  Not only are pension funds obligated to vote their shares, according to Aguilar, but they should also work to make certain that shareholder voting rights are not restricted, and actively support measures that support shareholder rights and enhance their ability to communicate their views to management.
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Tuesday, July 16, 2013

Are Institutional Investors Voting Proxies with the Correct Mindset?

Author: David Schwartz
The federal government is not now and has never been in the business of telling you how you should vote your proxies. But it seems that through regulatory creep, the government may have indirectly given the power to tell investors how to vote their proxies to someone else entirely. Regulating disclosures and mechanics by which we vote proxies is plainly within the scope of the Securities and Exchange Commission's mission. However, the federalization of proxy regulation may be driving institutional investors and investment advisers, to view their responsibility to vote on proxy matters with more of a compliance mindset than a fiduciary mindset. This compliance mindset has had the effect of entrenching proxy advisory firms solidly in the voting process and given them an outsized say in the way most proxy shares are voted. The federal government may not be dictating how institutional investors vote their proxies, but in a presumably unintended consequence, by regulation have given this power to proxy advisory firms.
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Sunday, September 9, 2012

How Do Mutual Funds Navigate Proxy Voting?

Author: David Schwartz
Mutual funds hold substantial power to influence corporate governance around the world.  In the United States alone, mutual funds own over a quarter of the outstanding shares of U.S. stocks. Clearly, this represents an enormous amount of the voting power. And, along with all this power comes great responsibility. How can funds vote these proxies effectively, that is, in the best interests of the funds and their shareholders?  The Mutual Fund Directors Forum, an educational organization for mutual fund independent directors, has released practical guidance to address how fund trustees and directors can exercise oversight of their proxy voting processes.
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