The new regulation that Security and Exchange Commissioners voted in November doesn’t fix proxy advisory industry duopoly problems, but it actually makes them worse: A group of scholars from major American universities filed a comment to ask the SEC to amend the proposed reform of public companies corporate governance.
On November 5, the Securities and Exchange Commission proposed new rules on how proxy advisory firms can advise shareholders on how to vote. The new regulation will also impact how shareholders can have their proposals on the ballots.
Investors who lack time and money to get direct information on the company they own shares in usually hire proxy advisory firms that make recommendations about how shareholders should vote. With the new rules, proxy advisors will have less room for maneuver, and voting against managements’ preferences will be much more difficult and expensive. Firms recommending a vote against executives will have to disclose the methodology of their analysis to companies’ management and will be exposed to a risk of federal litigation if the executives do not consider the methodology appropriate.
In the last two months, ProMarket has published a series of articles on the proposed reform, as well as an episode of Capitalisn’t, the podcast hosted by Luigi Zingales and Kate Waldock. The Stigler Center also organized an event to discuss the potential impact of new SEC regulation with Chicago Booth professor Steven Kaplan and Nell Minow, Vice Chair of ValueEdge Advisors, moderated by Zingales, the Stigler Center’s faculty director and one of the editors of this blog. You can watch the full video of the event here.
On January 15, a group of over 60 leading finance professors from major American universities filed the following comment to the SEC to ask a revision of the proposed draft regulation:
Dear Chairman Clayton and Members of the Commission:
We share the Commission’s concerns about concentration in the proxy advisory market. Yet, we disagree with the following proposed remedies: 1) forcing proxy advisors to share their opinions with managers ahead of time and 2) treating opinions on proxies as proxy solicitations. By increasing the cost of opining on proxy statements such proposals will only discourage new entry into the proxy advisory market and exacerbate the problem of market concentration in this sector.
We ask the Commission to strike these proposed changes.
Viral Acharya
C.V. Starr Professor of Economics
Leonard N. Stern School of Business, New York University
Anat Admati
George G.C. Parker Professor of Finance and Economics
Stanford Graduate School of Business
Rui Albuquerque
Associate Professor of Finance
Boston College
Michal Barzuza
Nicholas E. Chimicles Research Professor of Business Law and Regulation
UVA Law
Lucian Bebchuk
James Barr Ames Professor of Law, Economics, and Finance
Harvard Law School
Marianne Bertrand
Chris P. Dialynas Distinguished Service Professor Of Economics
The University of Chicago Booth School of Business
Bernard Black
Nicholas J. Chabraja Professor
Northwestern University Law School and Kellogg School of Management Law School
Margaret Blair
Milton R. Underwood Chair in Free Enterprise
Vanderbilt University Law School
Patrick Bolton
Barbara and David Zalaznick Professor of Business
Columbia Business School
Richard Booth
Martin G. McGuinn Chair in Business Law
Villanova University Charles Widger School of Law
William Bratton
Nicholas F. Gallicchio Professor of Law and Co-Director, Institute for Law & Economics
University of Pennsylvania Law School
Alon Brav
Peterjohn-Richards Professor of Finance
Fuqua School of Business
Ryan Bubb
Professor of Law
NYU School of Law
John Coffee
Adolf A. Berle Professor of Law
Columbia Law School
Robert Daines
Pritzker Professor of Law and Business
Stanford Law School
Mark DeFond
A.N. Mosich Chair of Accounting, Associate Dean of Faculty
University of Southern California
Espen Eckbo
Tuck Centennial Professor of Finance
Tuck School of Business at Dartmouth
Andrew Ellul
Professor of Finance and Fred T. Greene Chair in Finance
Kelley School of Business, Indiana University
Isil Erel
David A. Rismiller Chair in Finance
Ohio State University
Mara Faccio
Hanna Chair in Entrepreneurship & Associate Professor of Finance
Purdue University – Krannert School of Management
Allen Ferrell
Harvey Greenfield Professor of Securities Law
Harvard Law School
Jill Fisch
Perry Golkin Professor of Law, Co-Director, Institute for Law and Economics
University of Pennsylvania Law School
Vyacheslav Fos
Associate Professor of Finance and Hillenbrand Family Faculty Fellow
Boston College
Paolo Fulghieri
Professor of Finance
University of North Carolina
Martin Gelter
Professor of Law
Fordham University School of Law
Ronald Gilson
Charles J. Meyers Professor of Law and Business
Stanford Law School
Eitan Goldman
Associate Professor of Finance
Kelley School of Business, Indiana University
Todd Gormley
Associate Professor of Finance
Washington University in St. Louis
Diane Guercio
Gerry and Marilyn Cameron Professor of Finance
University of Oregon
Dirk Hackbarth
Professor of Finance
Boston University
Oliver Hart
Andrew E. Furer Professor of Economics
Department of Economics, Harvard University
Michael Jensen
Jesse Isidor Straus Professor of Business Administration, Emeritus
Graduate School of Business Administration, Harvard University
Wei Jiang
Arthur F. Burns Professor of Free and Competitive Enterprise
Columbia Business School
Kathryn Judge
Professor
Columbia Law School
Marcel Kahan
George T. Lowy Professor of Law
New York University School of Law
Reinier Kraakman
Ezra Ripley Thayer Professor of Law
Harvard Law School
Christian Leuz
Sondheimer Professor of International Economics, Finance, and Accounting
The University of Chicago Booth School of Business
Jonathan Macey
Sam Harris Professor of Corporate Law, Securities Law and Corporate Finance
Yale Law School
Nadya Malenko
Associate Professor of Finance
Boston College
Antonio Mello
Aschenbrener Fellow and Associate Professor of Finance
University of Wisconsin – Madison – School of Business
Andrew Metrick
Professor of Finance
Yale School of Management
Curtis Milhaupt
Professor of Law
Stanford Law School
Frank Partnoy
George E. Barrett Professor of Law and Finance
University of San Diego
Paul Pfleiderer
The C.O.G. Miller Distinguished Professor of Finance
Stanford Graduate School of Business
Katharina Pistor
Michael I. Sovern Professor of Law
Columbia Law School
Annette Poulsen
Sterne Professor of Banking and Finance
University of Georgia
Morgan Ricks
Professor
Vanderbilt University Law School
Mark Roe
David Burg Professor of Law
Harvard Law School
Ailsa Roell
Professor of International and Public Affairs
Columbia University
Joshua Ronen
Professor of Accounting
Stern School of Business, NYU
Paola Sapienza
Professor of Finance
Kellogg School of Management
Frederik Schlingemann
Professor of Finance
Joseph M. Katz Graduate School of Business, University of Pittsburgh
Antoinette Schoar
Michael Koerner ’49 Professor of Entrepreneurial Finance
MIT Sloan School of Management
Simone Sepe
Professor of Law and Finance
The University of Arizona; IAST – Toulouse School of Economics
Amit Seru
The Steven and Roberta Denning Professor of Finance
Stanford Graduate School of Business
David Skeel
Samuel Arsht Professor of Corporate Law
University of Pennsylvania – School of Law
Holger Spamann
Professor of Law
Harvard Law School
Laura Starks
Seay Regents Chair of Finance
McCombs School of Business
Randall Thomas
John S. Beasley Professor of Law and Business
Vanderbilt University Law School and Owen School of Management
Michael Weisbach
The Ralph W. Kurtz Chair in Finance
The Ohio State University
David Yermack
Chairman, Finance Department, Stern School of Business
New York University
Luigi Zingales
Robert C. McCormack Professor of Entrepreneurship and Finance
The University of Chicago Booth School of Business
The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.
