(Reuters) – The acting chair of the U.S. securities regulator on Wednesday called for clearer disclosures on how asset managers cast the votes that dominate most corporate elections.
Securities and Exchange Commission acting chair Allison Herren Lee said disclosure rules have failed to help everyday investors especially as they focus more on environmental and social issues. She called the N-PX forms that companies file “unwieldy, difficult to understand, and difficult to compare across fund complexes.”
“It is high time to revisit this critical form and make it useful in creating needed transparency around the fundamental exercise of shareholder voting,” Lee said in a speech to the Investment Company Institute, the fund industry’s main trade group.
Environmental groups, executive pay critics and other activists have criticized top fund managers for approving the vast majority of ballot items even as they have touted careful oversight of fund holdings. Some managers also have given up their rights to vote in exchange for fees when they lend out shares to short-sellers.
The current N-PX forms that show votes cast are unwieldy and can run to hundreds of pages for large funds owning many companies. Every year each may hold votes on a half-dozen or more ballot items like director elections, executive pay and shareholder proposals such as on climate issues or workforce diversity topics.
Under pressure fund managers including BlackRock Inc and Vanguard Group Inc lately have provided more explanations in a sampling of cases.
Some activists also have sought more explanations and more timely ones since N-PXs are only filed in late August, months after most meetings.
Funds have also developed new revenue streams lending out shares to short-sellers. Many did so for GameStop Corp, a year before a short-selling rally driven by interest from retail investors on social media.
Often those shares come with control of voting rights, which can skew corporate elections. Lee said fiduciaries should “be mindful” the revenue not undermine the power of shareholder votes.
(Reporting by Chris Prentice in Washington and Ross Kerber in Boston; Editing by David Gregorio)