A majority of U.S. public companies believe Securities and Exchange Commission proposed rules, if finalized, would cause proxy advisers to be more transparent, according to a survey from Willis Towers Watson released Wednesday.
Of the 105 companies surveyed, 83% said the proposed rules would increase transparency.
In August, the SEC proposed a series of rules regarding proxy voting. One piece of the proposed guidance is a new SEC interpretation that establishes proxy voting advice by proxy advisory firms as a solicitation.
The proposal prohibits any solicitation from containing any statement that is false or misleading with respect to any material fact. Also, to avoid rule violations, a proxy firm must provide an explanation of the methodology used to formulate its voting advice; disclose any third-party information sources and the extent to which the information from these sources differs from the company’s public disclosures, if such differences are material; and disclose material conflicts of interest.
Eight in 10 companies said they would speak up if they found a factual error in a proxy recommendation and 59% of companies consider factual errors to be a big problem in the current system, according to the survey.
Additionally, if companies disagreed with proxy adviser testing methodology, or if they received “against” voting recommendations, nearly half (46%) said they would provide feedback, the survey noted.
“These proposals are, above all, about greater transparency and clarity around pay issues and recommendations,” said Don Delves, North America head of executive compensation at Willis Towers Watson, in a news release. “They could go a long way toward eliminating errors and ultimately help shareholders make informed proxy voting decisions.”
Separately, Willis Towers Watson also found that companies expect to place greater emphasis on people issues over the next few years. More than 9 in 10 respondents said managing human capital resources will be important to their success over the next three years, compared to 71% over the past three years, the survey noted.
Additionally, 72% of respondents believe their compensation committees will oversee fair pay and gender pay issues in the next three years, compared to 52% who do so currently. More than half (54%) also say their compensation committees will be responsible for inclusion and diversity issues in the next three years, up from 45%, currently, according to the survey.
“There’s going to be much more work to do for companies and those who are professionals in the human-resources area to help arm both their management teams, and their boards and compensation committees to understand what’s going on in the various areas that we asked questions about,” said Steve Seelig, Arlington, Va.-based senior director in regulatory matters for Willis Towers Watson.
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