Securities and Exchange Commission
Floor Speech
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Mr. McCONNELL. Now on another matter, Mr. President, earlier this week, the Securities and Exchange Commission took a significant step into the 21st century. When public companies put business decisions up for a vote by their shareholders, it stands to reason that large asset managers who own many shares on behalf of their clients have enormous power to determine the outcome. Since these institutional investors lack the bandwidth to study every single company in great detail, many rely heavily on outside advisory firms.
In principle, there is nothing wrong with institutional investors getting advice, but in practice, things get pretty interesting. This cottage industry of proxy advisory firms is extremely concentrated in a very few hands. I believe the two largest firms have something like 97 percent market share between them, and their advice is often taken uncritically. One analysis of major asset managers found that 95 percent of their voting followed one advisory firm's recommendation.
So we have a small concentration of voices wielding enormous power over American business, and questions have arisen about whether they really exercise that power to serve the best financial interests of the investors. In some cases, the proxy advisers seem less interested in the particular interests of the particular company and more interested in advancing a preconceived ideological agenda. In other words, these firms are accused of leveraging their incredible influence to force corporations to conform to their own vision of social justice.
That is why, as the Chairman of the SEC explained, he receives letters from ordinary American investors expressing ``concern that their financial investments, including their retirement funds, were being steered by third parties to promote individual agendas, rather than to further their [own] primary goals'' of saving for retirement and leaving something behind for their kids and grandkids.
These proxy advisers are regulated by the SEC, and as it happens, some parts of these rules had not been updated since 1954. So this week the SEC has updated these Eisenhower-era guidelines for the 21st century. The new rules will enable more transparency and accountability. They will help ensure that these powerful voices have meaningful skin in the game and are not simply searching for a convenient vehicle to advance their preconceived interests.
I applaud the step forward by Chairman Clayton and the SEC.
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