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NAM Calls On Congress to Counter SEC's 'Regulatory Overreach'

The NAM said SEC actions have led to proposals that interfere with public company governance.

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The National Association of Manufacturers (NAM) sent a letter to Congress asking lawmakers to counter a trend of politically motivated proposals by third parties that interfere with public company governance.

NAM president and CEO Jay Timmons said manufacturers often receive shareholder proposals that “seek to advance environmental, social and governance (ESG) agendas unrelated to the business’ long-term prospects.”

"Manufacturers now receive shareholder proposals on a regular basis from activists that have little-to-no investment in their company or interest in its success," Timmons said. "Furthering these distracting and costly proposals are so-called 'proxy advisory firms,' which influence or control large swaths of the shareholder vote yet operate with minimal transparency and significant conflicts of interest.”

Timmons attributed the increase in politically motivated proposals to actions by the Securities and Exchange Commission, including:

  • Granting special access to the proxy ballot for ESG activists
  • Rolling back guardrails designed to inform and protect investors
  • Proposing ESG mandates NAM claims would increase costs for manufacturers and provide minimal benefit for investors

In the corporate governance policy agenda sent to members of the House Financial Services Committee, the NAM requested that Congress:

  • Prevent activists from hijacking the proxy ballot to pursue agendas unrelated to business growth and shareholder value creation
  • Limit proxy advisory firms’ influence on corporate governance
  • Reinforce asset managers’ fiduciary duty to Main Street investors and retirees
  • Require public companies to report only that information which is material to shareholders

In 2020, Timmons praised the SEC's regulations on proxy advisory firms and supplemental guidance on asset managers' use of such firms. Timmons said the rules would reduce proxy firms' influence on business decisions and empower manufacturers to prioritize investors' long-term best interests.

However, in 2021, the SEC announced it would suspend enforcement of the 2020 proxy firm rule. The NAM successfully brought suit against the suspension in 2022 and the case is pending before the Fifth Circuit Court of Appeals. Oral arguments for the case are scheduled for August. 

The NAM also opposed a 2022 SEC proposed rule that would make it easier for activists to flood the proxy ballot.

The letter concludes with a request that Congress counter the “SEC’s regulatory overreach” that Timmons said could interfere with manufacturers’ ability to finance growth and create jobs.

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