US manufacturers sue SEC over proxy rule
October 22, 2021
A group of US manufacturers are taking legal action in an effort to force the Securities and Exchange Commission (SEC) to enact a Trump-era rule designed to restrict the influence of proxy advisors.
The National Association of Manufacturers (NAM) has teamed up with Natural Gas Services to launch the claim, a company that has previously attempted to ‘correct’ information put out by proxy advisors.
Last year, under the supervision of the Trump administration, the SEC finalised a rule that would make it mandatory for proxy advisors to provide companies with the opportunity to view their recommendations prior to shareholder meetings, as well as to disclose conflicts of interest.
However, since Joe Biden entered the White House in January, the SEC has indicated that it plans to review the rule and will not enforce it in the meantime.
Linda Kelly, NAM general counsel, said the reversal by the SEC was unlawful. “The SEC’s rule on proxy advisory firms was a victory for manufacturers, but also for accountability and transparency,” she argued.
“The NAM intends to stand up for this rule, to hold the SEC to its responsibilities and to ensure that manufacturers on the public market and manufacturing workers with retirement savings are protected from proxy firms’ outsized influence.”
This is the first time the SEC has faced such a confrontation under the leadership of chairman Gary Gensler.
For years, US businesses have pushed for a crackdown on proxy advisors, arguing against their ability to influence votes on key corporate issues such as climate change, lobbying, and equal pay, as well as in director elections.
Proxy advisory service providers including Minerva Analytics argue that the Trump-era rule would cause delays to advice and limit investor independence. It would also seriously impact investors’ ability to drive positive change in boardrooms through company engagement.
This latest development follows another lawsuit against the SEC earlier this month.
Last Updated: 22 October 2021