Hester M. Peirce is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on her recent statement at an open meeting of the SEC. The views expressed in this post are those of Ms. Peirce and do not necessarily reflect those of the Securities and Exchange Commission or its staff.
Proxy voting advice businesses play an important role in our marketplace, a role that carries with it tremendous power. One root of that power is a 2003 Commission rule that required funds to publish their votes. [1] That rule pushed voting to the front burner for fund advisers, regardless of whether voting was a task that the funds and their shareholders wanted advisers to spend a lot of time on. Advisers looking to check the voting compliance box with as little headache as possible turned to proxy voting advice businesses for help, [2] a move enabled by staff no-action positions. [3] What followed was an outsourcing of the vote; funds’ voting decisions were handed over to proxy advisors, whose consequent power over public companies grew.
Two years ago, the Division of Investment Management took the commendable step of pulling back the no-action letters upon which this multi-tiered voting delegation edifice was constructed. [4] This action helped to facilitate a discussion about proxy voting, a discussion that has continued for the intervening two years with a lot of input from roundtable participants and commenters. That conversation is not over, but today’s releases are an important step toward modernizing the proxy voting system.
Comment Letter on Proposed Regulation of ESG Standards in ERISA Plans
More from: Jon Lukomnik
Jon Lukomnik is Managing Director of Sinclair Capital, LLC. This post is based on his comment letter submitted to the Department of Labor, with input from Keith Johnson and signed by 30 people, including various experts in the field. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here) and Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee by Robert H. Sitkoff and Max M. Schanzenbach (discussed on the Forum here).
To Whom It May Concern:
We are writing in opposition to proposed rule RIN 1210-AB95. We believe the rule is not only unnecessary, but
The proposed rule is based on a woefully incorrect understanding of the current state of investing knowledge and theory: An “eye singular” towards retirement security is not the same as encouraging willful blindness.
The major goal of investing for retirement is to create a desirable risk/return portfolio over time, so as to offset retirement expenses. As the Department of Labor wrote in the background to the rule, “Courts have interpreted the exclusive purpose rule of ERISA Section 404(a)(i)(A) to require fiduciaries to act with “complete and undivided loyalty to the beneficiaries,” The Supreme Court as recently as 2014 unanimously held in the context of ERISA retirement plans that such interests must be understood to refer to “financial” rather than “nonpecuniary” benefits… plan fiduciaries when making decisions on investments and investment courses of action must be focused solely on the plan’s financial returns and the interests of plan participants and beneficiaries in their plan benefits must be paramount.”
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