[Congressional Record (Bound Edition), Volume 155 (2009), Part 14]
[Extensions of Remarks]
[Page 19467]
[From the U.S. Government Publishing Office, www.gpo.gov]




     INTRODUCTION OF THE ``PROXY VOTING TRANSPARENCY ACT OF 2009''

                                 ______
                                 

                          HON. MARY JO KILROY

                                of ohio

                    in the house of representatives

                         Monday, July 27, 2009

  Ms. KILROY. Madam Speaker, this week the House Financial Services 
Committee is scheduled to markup legislation requiring mandatory ``say 
on pay'' shareholder votes on executive compensation packages and 
corporate golden parachutes. Today, I am introducing legislation that 
will make sure all investors will be able to hold the institutions that 
cast these votes accountable for their decisions.
  The ``say on pay'' legislation introduced by House Financial Services 
Committee Chairman Barney Frank (D-MA), H.R. 3269, gives shareholders 
an important new tool by requiring annual nonbinding shareholder votes 
on executive compensation and golden parachutes. This legislation is 
much needed given the abuses that have come to light during the 
financial crisis, as numerous CEOs have walked away from failing 
companies with multi-million dollar paydays.
  The ``say on pay'' votes mandated by H.R. 3269 will be executed 
through the corporate proxy process where traditionally votes are cast 
on corporate bylaw changes, director elections, and other matters. Many 
of these proxy votes are not cast by individual shareholders but rather 
by institutional investors who own shares on behalf of individuals, 
such as mutual funds, pension plans and hedge funds. Unfortunately, the 
only institutional investors currently required to disclose how they 
vote their proxies, including votes on executive compensation, are 
mutual funds. Some other institutional investors have voluntarily 
decided to disclose their proxy votes, but they are not legally 
required to do so.
  The legislation I am introducing today will require mandatory 
disclosure of all institutional investor proxy votes on ``say on pay'' 
issues and all other matters, including the elections of corporate 
boards. This bill will bring long overdue disclosure to the proxy 
voting records of hedge funds and other institutional investors.
  The need for disclosure of institutional investor proxy votes is a 
central recommendation of the July 2009 report of the Investors' 
Working Group (IWG), an independent task force sponsored by the CFA 
Institute and the Council of Intuitional Investors. The IWG task force 
is chaired by former SEC Chairmen Arthur Levitt, who was appointed SEC 
Chairman by President Clinton, and William Donaldson Levitt, who was 
appointed SEC Chairman by President George W. Bush. This bipartisan 
report recommends that:

       Institutional investors--including pension funds, hedge 
     funds and private equity firms--should make timely, public 
     disclosures about their proxy voting guidelines, proxy votes 
     cast, investment guidelines, and members of their governing 
     bodies and report annually on holdings and performance.

  The IWG task force is one of many voices calling for disclosure of 
institutional investor proxy votes. Both the AFL-CIO and the Investment 
Company Institute support their disclosure:

       The AFL-CIO strongly supports increased transparency in 
     proxy voting by all capital market participants . . .
       Greater transparency around proxy voting by institutional 
     investors should enhance the quality of the debate concerning 
     how the corporate franchise is used, particularly in the 
     context of ``say on pay'' proposals, where the public 
     disclosure of advisory votes would maximize their influence 
     over management.

  The legislation I am introducing will make sure all investors can 
monitor corporate proxy votes cast by institutional investors. It 
accomplishes this by requiring annual disclosure of proxy votes by any 
entity that is required to file ownership reports pursuant to Sec. 
13(f) of the Securities and Exchange Act of 1934. Today, Sec. 13(f) 
filers, who by definition invest more than $100 million in equity 
assets, must report their holdings quarterly. My legislation simply 
requires that once a year these institutions use their 13F forms to 
disclose their comprehensive proxy voting records.
  As Congress works on legislation providing new consumer protections 
and tougher regulation of Wall Street, I believe we must increase 
transparency and disclosure throughout the capital markets. This 
legislation marks an important step in that direction.

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