What Impact Will It Have?

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The Wall Street Journal reported that the SEC rescinded two letters roughly 15 years old – these letters rescinded the guidance that enshrined Proxy Advisory Firms (ISS, Glass Lewis, et al.) as “Stewards” of Corporate Governance.

The SEC letters said that pension funds or (Institutional Investors) could meet their fiduciary obligations to clients by relying on the voting recommendations of third parties like Glass Lewis and ISS.

This SEC action appears to be a prelude to the review of the regulation of the shareholder voting process.

The withdrawal of this SEC guidance will clearly create a dilemma for the institutions that relied on ISS and Glass Lewis (and others) for proxy voting recommendations.

One way of easing the pain is to use the Proxy Advisors to do the research on the issues on the proxy card to be voted – but abstain from making a voting recommendation.

In any event, it will require a series of adjustments, financially and organizationally for a number of Institutional Investors – with more angst to come following the SEC review of the proxy voting process.