Patching Proxy Plumbing: CII Urges SEC to Improve Voting Transparency

31 October 2025

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By Jack Grogan-Fenn

The Council of Institutional Investors (CII) has sent a letter to the US Securities and Exchange Commission (SEC) urging it to consider changes to promote proxy voting reliability and transparency, as well as increasing transparency over executive pay.

In response to the SEC’s invitation to comment on its semi-annual regulatory agenda, CII suggested that the commission should focus on improvements in three key areas: proxy vote reliability through end-to-end vote confirmation; proxy vote transparency through class-by-class vote result disclosures; and executive compensation transparency through non-Generally Accepted Accounting Principles (non-GAAP) reconciliation.

The letter from the CII highlights that the SEC’s semi-annual regulatory agenda no longer includes a project on “Proxy Process Amendments”, something which the council is “disappointed” about. It urged the commission to “add such a project back to the agenda that encompasses our advocacy priority, ‘end to end vote confirmation’.”

Founded in 1985 by 21 pension funds, CII’s voting members are US-based asset owners or issuers and include more than 135 public pension funds, corporate and labour funds, and foundations and endowments with approximately U$5.2 trillion in combined AUM. Non-voting members include 13 non-US asset owners with assets under management of approximately U$5.8 trillion in AUM, and more than 70 of the largest US and non-US asset managers with a combined AUM exceeding U$74 trillion, as well as more than 90 service providers and law firms. Minerva Analytics is a non-voting service provider member of CII.

CII’s membership-approved policy includes a statement that an “effective and efficient” proxy voting system “should provide for end-to-end confirmation enabling both companies and shareowners to confirm that votes properly cast were included in the final tally as directed”. However, the complexity of ‘proxy plumbing’ – the complexity of the infrastructure underpinning proxy voting – presents persistent challenges to achieving this fundamental expectation.

“CII is absolutely right to call for the SEC to return to proxy plumbing,” said Sarah Wilson, CEO at Minerva Analytics. “There is still far too much unnecessary complexity and opacity in the system – that does not instil confidence. We need to stay 100% focussed and not let reforms get side-tracked again.”

CII is involved with a working group co-chaired by the Society for Corporate Governance to ensure that the various voting chain intermediaries – including banks, broker-dealers, public companies, transfer agents and tabulators – work together to ensure that beneficial shareholders can confirm that their votes in contested director elections were counted correctly. CII has suggested that the SEC concurrently create a project on its agenda to monitor the progress being made in end-to-end vote confirmation, and only if it becomes necessary, consider proposals to facilitate end-to-end vote confirmations to end-users.

The letter suggests that a potential rule could simply require all participants in the voting chain to grant to issuers, or their transfer agents or vote tabulators, access to certain information relating to voting records, for the limited purpose of enabling a shareholder or securities intermediary to confirm how a particular shareholder’s shares were voted.

The SEC’s current Chair Paul Atkins is a renowned shareholder rights critic and has previously personally voiced concerns about the “tyranny of the minority” in reference to shareholder proposals under Rule 14a-8 of the Securities and Exchange Act of 1934. He has also been expected to lean in favour of state regulations regarding shareholder proposals. Under his leadership, the SEC has adopted an increasingly hostile stance towards both shareholder rights and proxy advisors.

Regarding Rule 14a-8, the Republican-run House Committee on Financial Services held a hearing entitled “Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder Value” purporting to assess whether the shareholder proposal process has been “co-opted by activist investors who prioritise narrow policy goals over maximising shareholder value”, as reported by Minerva Analytics. Earlier this month, Atkins also suggested that the “intersection” between the SEC’s Rule 14a-8 and state corporate law could be exploited to exclude environmental and social shareholder proposals, as reported by Minerva Analytics.

CII’s letter welcomed Atkins including a project “to rationalize disclosure practices to facilitate material disclosure by companies and shareholders’ access to that information” in his first agenda of rulemaking actions. However, it also urged the commission to “consider including a provision in the Disclosure Project that would improve the transparency of the voting results at multi-class companies”.

Under the SEC’s current rules, companies are required to disclose two primary pieces of information with respect to meeting results: aggregate vote tallies for each proposal and whether each proposal passed or failed. However, this limited transparency can conceal the degree to which high-vote shareholders of multi-class companies are “vetoing” the preferences of the holders of the majority of the company’s equity.

DCSS can prove damaging to transparency for shareholders due to its creation of separate classes of shares with different voting powers, widely referred to as Class A and Class B shares. These separate shares often give founders and senior figures at companies greater control and restrict the influence that shareholders can have. This can mean that a majority of shareholders are in favour of a proposal or certain change but are unable to achieve this due to the control some Class B shareholders have under the DCSS.

“By providing class-by-class disclosure of voting results, we believe companies’ shareholders, and potentially the board members who represent them, would have the means to affirmatively determine whether the board’s response to a proposal’s outcome is consistent with the preferences of the broad shareholder base representing the majority of outstanding equity,” the letter read.

The CII stressed in its letter that the ‘one share, one vote’ principle is a foundation of good corporate governance and was one of the first policies that the council’s members endorsed. Minerva Analytics also shares this view, considering it a core pillar of good governance.

DCSS have become increasingly prominent in recent years, particularly among US companies and those operating in the tech sector. Those defending DCSS cite its encouragement of founders to publicly list stock by allowing them to retain control, insulating founders from activist shareholders firm and allowing management to adopt a long-term focus. However, there are significant drawbacks for shareholders. These include damaging the ability of investors to hold companies to account, putting public shareholders at greater financial risk than others with superior voting power and making it more difficult for investors to have their voices heard.

Despite this being a controversial issue in the eyes of many shareholders, there are currently no sunset clause rules for DCSS in the US. CII pointed to Alphabet and Meta as being among several major companies that have adopted dual- or even triple-class capital structures with unequal voting rights.

The CII similarly wrote to the US House Committee on Financial Services in April to introduce legislation requiring class-by-class disclosure of vote results, as reported by Minerva Analytics. It urged the committee to consider amending existing laws or introducing a standalone bill to enhance transparency in the voting results of DCSS companies. CII particularly highlighted the proposed Enhancing Multi-Class Share Disclosures Act that would update the Securities Exchange Act of 1934 to require companies with multi-class stock structures to disclose certain information in their proxy or consent solicitation materials.

The US House of Representatives overwhelmingly voted in favour of the Multi-Class Share Disclosures Act in July, being backed by 381 members of the House, significantly higher than the two-thirds minimum it required to pass. As reported by Minerva Analytics, it has now been received by the US Senate and referred to the Committee on Banking, Housing, and Urban Affairs. The act received strong bipartisan support, comprising 205 votes from Democrats and 176 from Republicans. Only 31 Republican votes were cast against the bill, underscoring the importance of addressing the issue of DCSS across the political spectrum.

Minerva Analytics’ recently published 2025 Proxy Season Review spotlighted DCSS and attempts by some regulators, including those in Europe and the UK, are relaxing rules and compliance burden to boost market competitiveness. Minerva is due to publish a briefing focused on DCSS in November. Sign up to our weekly newsletter to be notified about its publication.

CII also repeated a request it first made in a 2019 rulemaking petition that the SEC require disclosure of a quantitative reconciliation to GAAP of Non-GAAP Financial Measures used to determine executive compensation; and a qualitative description of why the Non-GAAP Financial Measures are better for determining executive pay than GAAP financial measures.

“We continue to believe it is imperative that the SEC promptly propose a rule that, at a minimum, closes “the loophole on the lack of quantitative reconciliation between GAAP and non-GAAP financial measures for executive compensation targets”,” the letter stated.

The CII said that support for its policy and the 2019 Petition were reflected in comments responding to the SEC’s Roundtable on Executive Compensation Disclosure Requirements in June. The council pointed to a comment letter from Norges Bank Investment Management, which recommended that the SEC require reconciliation of any non-GAAP metrics to GAAP in table format rather than narrative text, and noted that this information already exists in company records meaning it would mark a shift in disclosure focus and presentation rather than an additional reporting burden.

The SEC is reportedly considering both relaxing rules on executive pay and moving to alleviate regulatory burdens for public companies, with the commission holding a roundtable focused on executive compensation disclosure requirements in June, as reported by Minerva Analytics.

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Last Updated: 31 October 2025