* Nasdaq's Knight, proxy advisors trade claims at Washington
* Former SEC Chairman Pitt says too many investors defer to
By Ross Kerber
Dec 5 Nasdaq OMX Group's top attorney called on
regulators to finish a review of the proxy system that governs
U.S. companies, saying proxy advisory firms are too opaque.
Completing a review of the proxy voting system begun several
years ago "is absolutely necessary" for the new chairman of the
U.S. Securities and Exchange Commission, said Edward Knight,
Nasdaq general counsel, on Wednesday.
Knight spoke at an event in Washington, D.C. sponsored by
the U.S. Chamber of Commerce. The business lobbying group lately
has ramped up criticism of proxy advisers like the ISS unit of
MSCI Inc and Glass, Lewis & Co. Some executives say the
two firms have gained too much influence over how shareholders
vote on matters like executive pay and are not responsive to
"We need to evolve these firms so they are more accountable,
less opaque," Knight said.
Representatives of ISS and Glass, Lewis also attended the
event and stood up for their work. Glass, Lewis Chief Policy
Officer Robert McCormick compared the complaints of executives
to the satirical website theonion.com, saying: "It's like a
headline from The Onion - 'Corporations Call For More
REVIEWS AT STANDSTILL
McCormick and ISS Special Counsel Patrick McGurn were making
something of an appearance in the lion's den, as the Chamber has
been one of both firm's sternest critics. Since May, for
instance, the Chamber has called for the SEC and the Labor
Department to review Glass, Lewis.
Chamber spokeswoman Lisa Burgess said via e-mail that
neither agency has responded.
Together the two firms advise thousands of big investors
like pension systems and mutual funds on how to cast their
ballots in annual proxy contests. Once sleepy affairs, these
springtime gatherings have soared in importance as activist
investors, labor groups and others use them to pressure
companies on areas like takeover defenses and pay.
In 2010 the SEC issued a "concept release" seeking input on
how to improve the proxy system. But the agency has said little
since then, leaving the area high on the agenda. SEC Chairman
Mary Schapiro said last month she will leave the agency on
December 14. She will be succeeded as chairman by commissioner
Elisse Walter at least in the short run.
PITT TAKES MIDDLE GROUND
At Wednesday's event, which was webcast, Nasdaq's Knight
said the stock exchange operator wanted clearer rules about
proxy advisors and other elements of corporate governance in
order to encourage the formation of more public companies.
Former SEC Chairman Harvey Pitt said investors themselves
must take more of a role in their voting. He said too many big
shareholders simply follow the advisors' suggestions, and called
that "a dereliction of a core fiduciary obligation of the
Pitt said he would like to see more analysis before he would
back new rules for proxy advisors, however. Pitt said a better
step would be for the SEC to withdraw two administrative letters
it sent investors in 2004 that effectively encouraged them to
rely on the advisors in deciding how to vote.