From Davis Polk:
On September 29, 2021, the Securities and Exchange Commission (SEC) proposed amendments to Form N-PX to enhance the information mutual funds, exchange-traded funds (ETFs), and other registered management investment companies (collectively, funds) currently report annually about their proxy votes. The SEC also proposed new Rule 14Ad-1 under the Securities Exchange Act of 1934, as amended (Exchange Act) and amendments to Form N-PX to require institutional investment managers subject to Section 13(f) of the Exchange Act (managers) to report annually on Form N-PX how they voted proxies on executive compensation, or so-called “say-on-pay” matters.
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The SEC is also proposing to require funds and managers to categorize each proxy voting matter reported on Form N-PX so that investors can focus on the topics they find important.
I am going to try to explain this in words simple enough even for an SEC bureaucrat to understand: Because I am an intelligent investor, I invest in passively managed index funds. The only thing I need or want to know about my funds is whether they are matching the index they claim to track. In the case of my S&P 500 fund, for example, all I want to know is how the S&P 500 index did in the relevant period and how the fund did.
I do not want my funds spending my money on administrative nonsense like detailed proxy voting disclosures. All that does is raise my costs and reduce my returns.
How hard is that for you people to understand?
SEC Commissioner Hester Peirce was the sole commissioner to vote against this moronic proposal. She explained that:
Although a fund’s voting strategy can be an important part of the overall fund management strategy, how or why a fund votes, or even whether a fund votes on a particular issue at a particular portfolio company is unlikely materially to influence an investor’s choice to invest in a particular fund.
Exactly right.
So what's going on here? Is the SEC just stupid? Or is this part of Chairman Gary gensler's woke capitalism agenda? Back to Commissioner Peirce:
The real interest in this kind of detailed voting information seems to come from activists and the ever-expanding population of “stakeholders,” for whom proxy voting seems to be the fund’s highest purpose. In 2003, when the SEC was considering the original Form N-PX fund voting disclosure mandate, the heads of the two then-largest asset managers jointly penned a remarkably prescient Wall Street Journal opinion piece. In it, they warned that:
[R]equiring mutual-fund managers to disclose their votes on corporate proxies would politicize proxy voting. In case after case, it would open mutual-fund voting decisions to thinly veiled intimidation from activist groups whose agendas may have nothing to do with maximizing our clients’ returns.
