The U.S. Securities and Exchange Commission has made an about-face on commonsense investor protections it adopted last year to provide appropriate oversight of so-called proxy advisory firms—and the NAM is pushing back.
The background: Last year, the NAM won a major victory when the SEC published a new rule to regulate proxy firms, which have significant influence over public company governance decisions and the performance of shareholders’ investments. Now under new leadership, the SEC has so far refused to enforce the rule—and yesterday, the commission issued a new proposal that would wipe out important progress.
What it means: The rule secured by the NAM ensured that investors would have access to more complete and accurate information before casting proxy votes. The SEC’s new proposal would reverse the rule’s requirements that proxy firms engage with public companies—specifically rescinding the provisions mandating that the firms provide copies of their recommendations to impacted businesses and notify investors when those businesses file a response. The new proposal also weakens the SEC’s anti-fraud standards for materially misleading statements published by proxy firms.
A deeper dive: Beyond the rule itself, the action points to larger problems at the SEC.
- Politics over policy: By reversing a rule that had been developed over the course of a decade through leadership from both political parties and with significant input from all sectors, the SEC is undercutting the capital markets’ need for a steady, apolitical regulator.
- Not the first time: Even before yesterday’s rule change, the SEC had unlawfully refused to enforce the existing proxy firm rule. The NAM filed suit last month to force the SEC to abide by laws on the books.
- Arbitrary changes: The 2020 rule was set to take effect on Dec. 1 of this year, so the SEC had no new information about its impact on the market when it voted to reverse course—raising serious questions about the commission’s compliance with the Administrative Procedure Act’s prohibition on “arbitrary and capricious” rulemaking.
Next steps: The NAM is challenging the SEC’s nonenforcement of the 2020 rule in court, and we will continue to hold the SEC’s feet to the fire. We will also engage with the SEC on its new proposal and will push back on the commission’s attempts to remove these critical investor protections.
What we’re saying: NAM Senior Vice President of Policy and Government Relations Aric Newhouse released a statement on the SEC’s about-face: “The NAM is extremely concerned that the SEC has proposed substantial revisions to last year’s reasonable, light-touch proxy advisory firm rule—especially absent any new information about its impact on the market. Businesses and investors need reliable rules of the road, and the NAM is disappointed that the SEC plans to reverse course on a decade’s worth of bipartisan, consensus-driven policymaking just a year after the rule’s reforms were finalized. The SEC’s about-face is deeply troubling, but manufacturers continue to support appropriate oversight of proxy firms given their conflicts of interest, errors and outsized influence. The NAM looks forward to engaging with the SEC to defend the rule’s commonsense investor protections in the coming months.”
What they’re saying: Don’t take our word for it; check out this in-depth examination from professors Paul Rose and Christopher J. Walker at The Ohio State University Moritz College of Law, who explore the policy and legal concerns around the SEC’s actions.
Washington, D.C. – Ahead of the midterm elections, the National Association of Manufacturers released its policy roadmap, “Competing to Win,” a comprehensive blueprint featuring immediate solutions for bolstering manufacturers’ competitiveness. It is also a roadmap for policymakers on the laws and regulations needed to strengthen the manufacturing industry in the months and years ahead.
With the country facing rising prices, snarled supply chains and geopolitical turmoil, manufacturers are outlining an actionable competitiveness agenda that Americans across the political spectrum can support. “Competing to Win” includes the policies manufacturers in America will need in place to continue driving the country forward.
“‘Competing to Win’ offers a path for bringing our country together around policies, shared values and a unified purpose,” said NAM President and CEO Jay Timmons. “The NAM is putting forward a plan filled with ideas that policymakers could pursue immediately, including solutions to urgent problems, such as energy security, immigration reform, supply chain disruptions, the ongoing workforce shortage and more. Manufacturers have shown incredible resilience through difficult times, employing more workers now than before the pandemic, but continued resilience is not guaranteed without the policies that are critical to the state of manufacturing in America.”
The NAM and its members will leverage “Competing to Win” to shape policy debates ahead of the midterm elections, in the remainder of the 117th Congress and at the start of the 118th Congress—including in direct engagement with lawmakers, for grassroots activity, across traditional and digital media and through events in key states and districts as we did following the initial rollout of the roadmap in 2016.
The document focuses on 12 areas of action, and all policies are rooted in the values that have made America exceptional and keep manufacturing strong: free enterprise, competitiveness, individual liberty and equal opportunity.
Learn more about how manufacturers are leading and about the industry’s competitiveness agenda at nam.org/competing-to-win.
The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org