[Congressional Record Volume 165, Number 178 (Thursday, November 7, 2019)]
[Senate]
[Page S6454]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   SECURITIES AND EXCHANGE COMMISSION

  Mr. McCONNELL. Now on another matter, Mr. President, earlier this 
week, the Securities and Exchange Commission took a significant step 
into the 21st century. When public companies put business decisions up 
for a vote by their shareholders, it stands to reason that large asset 
managers who own many shares on behalf of their clients have enormous 
power to determine the outcome. Since these institutional investors 
lack the bandwidth to study every single company in great detail, many 
rely heavily on outside advisory firms.
  In principle, there is nothing wrong with institutional investors 
getting advice, but in practice, things get pretty interesting. This 
cottage industry of proxy advisory firms is extremely concentrated in a 
very few hands. I believe the two largest firms have something like 97 
percent market share between them, and their advice is often taken 
uncritically. One analysis of major asset managers found that 95 
percent of their voting followed one advisory firm's recommendation.
  So we have a small concentration of voices wielding enormous power 
over American business, and questions have arisen about whether they 
really exercise that power to serve the best financial interests of the 
investors. In some cases, the proxy advisers seem less interested in 
the particular interests of the particular company and more interested 
in advancing a preconceived ideological agenda. In other words, these 
firms are accused of leveraging their incredible influence to force 
corporations to conform to their own vision of social justice.
  That is why, as the Chairman of the SEC explained, he receives 
letters from ordinary American investors expressing ``concern that 
their financial investments, including their retirement funds, were 
being steered by third parties to promote individual agendas, rather 
than to further their [own] primary goals'' of saving for retirement 
and leaving something behind for their kids and grandkids.
  These proxy advisers are regulated by the SEC, and as it happens, 
some parts of these rules had not been updated since 1954. So this week 
the SEC has updated these Eisenhower-era guidelines for the 21st 
century. The new rules will enable more transparency and 
accountability. They will help ensure that these powerful voices have 
meaningful skin in the game and are not simply searching for a 
convenient vehicle to advance their preconceived interests.
  I applaud the step forward by Chairman Clayton and the SEC.

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