The U.S. Chamber of Congress strongly supports H.R. 448, the “Putting Investors First Act,” which would provide for robust oversight of the proxy advisory industry, ensure that investment managers vote proxies in the best interests of their clients, and further reform the shareholder proposal process under Securities Exchange Act Rule 14a-8.

In 2020, the Securities and Exchange Commission (SEC) adopted reforms to the proxy voting system for public companies. The SEC’s reforms addressed longstanding problems within the proxy advisory industry, which wields enormous influence over public companies but is dominated by only two firms and operates with significant conflicts of interest. Proxy advisory firms have established themselves as indispensable ally of special interest activists and often support shareholder resolutions that advance social or political objectives at the expense of long-term shareholder returns. The SEC also made reforms to the shareholder proposal system to combat the influence of such activists, whose interests are often divorced from the company’s and everyday investors’ long-term interests.

Regrettably, over the last 18 months, the SEC has sought to weaken and undermine the 2020 reforms, including recently finalized regulations that effectively neutralize the 2020 proxy advisor rules, and has proposed changes to the shareholder proposal rules that would increase the number of frivolous proposals companies receive. The SEC’s recent actions would tilt the scales in favor of special interests, distract companies from focusing on long-term performance, and ultimately harm investors that have no interest in using their 401(k)’s or other savings vehicles to engage in contentious social or political debates.