[Congressional Record (Bound Edition), Volume 163 (2017), Part 14]
[House]
[Pages 20416-20432]
[From the U.S. Government Publishing Office, www.gpo.gov]




        CORPORATE GOVERNANCE REFORM AND TRANSPARENCY ACT OF 2017

  Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 657, I call 
up the bill (H.R. 4015) to improve the quality of proxy advisory firms 
for the protection of investors and the U.S. economy, and in the public 
interest, by fostering accountability, transparency, responsiveness, 
and competition in the proxy advisory firm industry, and ask for its 
immediate consideration in the House.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Bost). Pursuant to House Resolution 657, 
an amendment in the nature of a substitute consisting of the text of 
Rules Committee Print 115-46 is adopted, and the bill, as amended, is 
considered read.
  The text of the bill, as amended, is as follows:

                               H.R. 4015

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Corporate Governance Reform 
     and Transparency Act of 2017''.

     SEC. 2. DEFINITIONS.

       (a) Securities Exchange Act of 1934.--Section 3(a) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended 
     by adding at the end the following new paragraphs:
       ``(81) Proxy advisory firm.--The term `proxy advisory firm' 
     means any person who is primarily engaged in the business of 
     providing proxy voting research, analysis, ratings, or 
     recommendations to clients, which conduct constitutes a 
     solicitation within the meaning of section 14 and the 
     Commission's rules and regulations thereunder, except to the 
     extent that the person is exempted by such rules and 
     regulations from requirements otherwise applicable to persons 
     engaged in a solicitation.
       ``(82) Person associated with a proxy advisory firm.--The 
     term `person associated with' a proxy advisory firm means any 
     partner, officer, or director of a proxy advisory firm (or 
     any person occupying a similar status or performing similar 
     functions), any person directly or indirectly controlling, 
     controlled by, or under common control with a proxy advisory 
     firm, or any employee of a proxy advisory firm, except that 
     persons associated with a proxy advisory firm whose functions 
     are clerical or ministerial shall not be included in the 
     meaning of such term. The Commission may by rules and 
     regulations classify, for purposes or any portion or portions 
     of this Act, persons, including employees controlled by a 
     proxy advisory firm.''.
       (b) Applicable Definitions.--As used in this Act--
       (1) the term ``Commission'' means the Securities and 
     Exchange Commission; and
       (2) the term ``proxy advisory firm'' has the same meaning 
     as in section 3(a)(81) of the Securities Exchange Act of 
     1934, as added by this Act.

     SEC. 3. REGISTRATION OF PROXY ADVISORY FIRMS.

       (a) Amendment.--The Securities Exchange Act of 1934 is 
     amended by inserting after section 15G the following new 
     section:

     ``SEC. 15H. REGISTRATION OF PROXY ADVISORY FIRMS.

       ``(a) Conduct Prohibited.--It shall be unlawful for a proxy 
     advisory firm to make use of the mails or any means or 
     instrumentality of interstate commerce to provide proxy 
     voting research, analysis, or recommendations to any client, 
     unless such proxy advisory firm is registered under this 
     section.
       ``(b) Registration Procedures.--
       ``(1) Application for registration.--
       ``(A) In general.--A proxy advisory firm must file with the 
     Commission an application for registration, in such form as 
     the Commission shall require, by rule or regulation, and 
     containing the information described in subparagraph (B).
       ``(B) Required information.--An application for 
     registration under this section shall contain information 
     regarding--
       ``(i) a certification that the applicant is able to 
     consistently provide proxy advice based on accurate 
     information;
       ``(ii) the procedures and methodologies that the applicant 
     uses in developing proxy voting recommendations, including 
     whether and how the applicant considers the size of a company 
     when making proxy voting recommendations;
       ``(iii) the organizational structure of the applicant;
       ``(iv) whether or not the applicant has in effect a code of 
     ethics, and if not, the reasons therefor;
       ``(v) any potential or actual conflict of interest relating 
     to the ownership structure of the applicant or the provision 
     of proxy advisory services by the applicant, including 
     whether the proxy advisory firm engages in services ancillary 
     to the provision of proxy advisory services such as 
     consulting services for corporate issuers, and if so the 
     revenues derived therefrom;
       ``(vi) the policies and procedures in place to manage 
     conflicts of interest under subsection (f); and
       ``(vii) any other information and documents concerning the 
     applicant and any person associated with such applicant as 
     the Commission, by rule, may prescribe as necessary or 
     appropriate in the public interest or for the protection of 
     investors.
       ``(2) Review of application.--
       ``(A) Initial determination.--Not later than 90 days after 
     the date on which the application for registration is filed 
     with the Commission under paragraph (1) (or within such 
     longer period as to which the applicant consents) the 
     Commission shall--
       ``(i) by order, grant registration; or
       ``(ii) institute proceedings to determine whether 
     registration should be denied.
       ``(B) Conduct of proceedings.--
       ``(i) Content.--Proceedings referred to in subparagraph 
     (A)(ii) shall--

       ``(I) include notice of the grounds for denial under 
     consideration and an opportunity for hearing; and
       ``(II) be concluded not later than 120 days after the date 
     on which the application for registration is filed with the 
     Commission under paragraph (1).

       ``(ii) Determination.--At the conclusion of such 
     proceedings, the Commission, by order, shall grant or deny 
     such application for registration.
       ``(iii) Extension authorized.--The Commission may extend 
     the time for conclusion of such proceedings for not longer 
     than 90 days, if it finds good cause for such extension and 
     publishes its reasons for so finding, or for such longer 
     period as to which the applicant consents.
       ``(C) Grounds for decision.--The Commission shall grant 
     registration under this subsection--
       ``(i) if the Commission finds that the requirements of this 
     section are satisfied; and
       ``(ii) unless the Commission finds (in which case the 
     Commission shall deny such registration) that--

       ``(I) the applicant has failed to certify to the 
     Commission's satisfaction that it is able to consistently 
     provide proxy advice based on accurate information and to 
     materially comply with the procedures and methodologies 
     disclosed under paragraph (1)(B) and with subsections (f) and 
     (g); or
       ``(II) if the applicant were so registered, its 
     registration would be subject to suspension or revocation 
     under subsection (e).

       ``(3) Public availability of information.--Subject to 
     section 24, the Commission shall make the information and 
     documents submitted to the Commission by a proxy advisory 
     firm in its completed application for registration, or in any 
     amendment submitted under paragraph (1) or (2) of subsection 
     (c), publicly available on the Commission's website, or 
     through another comparable, readily accessible means.
       ``(c) Update of Registration.--
       ``(1) Update.--Each registered proxy advisory firm shall 
     promptly amend and update its application for registration 
     under this section if any information or document provided 
     therein becomes materially inaccurate, except that a 
     registered proxy advisory firm is not required to amend the 
     information required to be filed under subsection 
     (b)(1)(B)(i) by filing information under this paragraph, but 
     shall amend such information in the annual submission of the 
     organization under paragraph (2) of this subsection.
       ``(2) Certification.--Not later than 90 calendar days after 
     the end of each calendar year, each registered proxy advisory 
     firm shall file with the Commission an amendment to its 
     registration, in such form as the Commission, by rule, may 
     prescribe as necessary or appropriate in the public interest 
     or for the protection of investors--
       ``(A) certifying that the information and documents in the 
     application for registration of such registered proxy 
     advisory firm continue to be accurate in all material 
     respects; and
       ``(B) listing any material change that occurred to such 
     information or documents during the previous calendar year.
       ``(d) Censure, Denial, or Suspension of Registration; 
     Notice and Hearing.--The Commission, by order, shall censure, 
     place limitations on the activities, functions, or operations 
     of, suspend for a period not exceeding 12 months, or revoke 
     the registration of any registered proxy advisory firm if the 
     Commission finds, on the record after notice and opportunity 
     for hearing, that such censure, placing of

[[Page 20417]]

     limitations, suspension, or revocation is necessary for the 
     protection of investors and in the public interest and that 
     such registered proxy advisory firm, or any person associated 
     with such an organization, whether prior to or subsequent to 
     becoming so associated--
       ``(1) has committed or omitted any act, or is subject to an 
     order or finding, enumerated in subparagraph (A), (D), (E), 
     (H), or (G) of section 15(b)(4), has been convicted of any 
     offense specified in section 15(b)(4)(B), or is enjoined from 
     any action, conduct, or practice specified in subparagraph 
     (C) of section 15(b)(4), during the 10-year period preceding 
     the date of commencement of the proceedings under this 
     subsection, or at any time thereafter;
       ``(2) has been convicted during the 10-year period 
     preceding the date on which an application for registration 
     is filed with the Commission under this section, or at any 
     time thereafter, of--
       ``(A) any crime that is punishable by imprisonment for one 
     or more years, and that is not described in section 
     15(b)(4)(B); or
       ``(B) a substantially equivalent crime by a foreign court 
     of competent jurisdiction;
       ``(3) is subject to any order of the Commission barring or 
     suspending the right of the person to be associated with a 
     registered proxy advisory firm;
       ``(4) fails to furnish the certifications required under 
     subsections (b)(2)(C)(ii)(I) and (c)(2);
       ``(5) has engaged in one or more prohibited acts enumerated 
     in paragraph (1); or
       ``(6) fails to maintain adequate financial and managerial 
     resources to consistently offer advisory services with 
     integrity, including by failing to comply with subsections 
     (f) or (g).
       ``(e) Termination of Registration.--
       ``(1) Voluntary withdrawal.--A registered proxy advisory 
     firm may, upon such terms and conditions as the Commission 
     may establish as necessary in the public interest or for the 
     protection of investors, which terms and conditions shall 
     include at a minimum that the registered proxy advisory firm 
     will no longer conduct such activities as to bring it within 
     the definition of proxy advisory firm in section 3(a)(81) of 
     the Securities Exchange Act of 1934, withdraw from 
     registration by filing a written notice of withdrawal to the 
     Commission.
       ``(2) Commission authority.--In addition to any other 
     authority of the Commission under this title, if the 
     Commission finds that a registered proxy advisory firm is no 
     longer in existence or has ceased to do business as a proxy 
     advisory firm, the Commission, by order, shall cancel the 
     registration under this section of such registered proxy 
     advisory firm.
       ``(f) Management of Conflicts of Interest.--
       ``(1) Organization policies and procedures.--Each 
     registered proxy advisory firm shall establish, maintain, and 
     enforce written policies and procedures reasonably designed, 
     taking into consideration the nature of the business of such 
     registered proxy advisory firm and associated persons, to 
     address and manage any conflicts of interest that can arise 
     from such business.
       ``(2) Commission authority.--The Commission shall issue 
     final rules to prohibit, or require the management and 
     disclosure of, any conflicts of interest relating to the 
     offering of proxy advisory services by a registered proxy 
     advisory firm, including, without limitation, conflicts of 
     interest relating to--
       ``(A) the manner in which a registered proxy advisory firm 
     is compensated by the client, or any affiliate of the client, 
     for providing proxy advisory services;
       ``(B) the provision of consulting, advisory, or other 
     services by a registered proxy advisory firm, or any person 
     associated with such registered proxy advisory firm, to the 
     client;
       ``(C) business relationships, ownership interests, or any 
     other financial or personal interests between a registered 
     proxy advisory firm, or any person associated with such 
     registered proxy advisory firm, and any client, or any 
     affiliate of such client;
       ``(D) transparency around the formulation of proxy voting 
     policies;
       ``(E) the execution of proxy votes if such votes are based 
     upon recommendations made by the proxy advisory firm in which 
     someone other than the issuer is a proponent;
       ``(F) issuing recommendations where proxy advisory firms 
     provide advisory services to a company; and
       ``(G) any other potential conflict of interest, as the 
     Commission deems necessary or appropriate in the public 
     interest or for the protection of investors.
       ``(g) Reliability of Proxy Advisory Firm Services.--
       ``(1) In general.--Each registered proxy advisory firm 
     shall have staff sufficient to produce proxy voting 
     recommendations that are based on accurate and current 
     information. Each registered proxy advisory firm shall detail 
     procedures sufficient to permit companies receiving proxy 
     advisory firm recommendations access in a reasonable time to 
     the draft recommendations, with an opportunity to provide 
     meaningful comment thereon, including the opportunity to 
     present details to the person responsible for developing the 
     recommendation in person or telephonically. Each registered 
     proxy advisory firm shall employ an ombudsman to receive 
     complaints about the accuracy of voting information used in 
     making recommendations from the subjects of the proxy 
     advisory firm's voting recommendations, and shall seek to 
     resolve those complaints in a timely fashion and in any event 
     prior to voting on the matter to which the recommendation 
     relates. If the ombudsman is unable to resolve such 
     complaints prior to voting on the matter, the proxy advisory 
     firm shall include in its final report to its clients a 
     statement from the company detailing its complaints, if 
     requested in writing by the company.
       ``(2) Reasonable time defined.--For purposes of this 
     subsection, the term `reasonable time'--
       ``(A) means not less than 3 business days unless otherwise 
     defined through a final rule issued by the Commission; and
       ``(B) shall not otherwise interfere with a proxy advisory 
     firm's ability to provide its clients with timely access to 
     accurate proxy voting research, analysis, or recommendations.
       ``(3) Draft recommendations defined.--For purposes of this 
     subsection, the term `draft recommendations'--
       ``(A) means the overall conclusions of proxy voting 
     recommendations prepared for the clients of a proxy advisory 
     firm, including any public data cited therein, any company 
     information or substantive analysis impacting the 
     recommendation, and the specific voting recommendations on 
     individual proxy ballot issues; and
       ``(B) does not include the entirety of the proxy advisory 
     firm's final report to its clients.
       ``(h) Designation of Compliance Officer.--Each registered 
     proxy advisory firm shall designate an individual responsible 
     for administering the policies and procedures that are 
     required to be established pursuant to subsections (f) and 
     (g), and for ensuring compliance with the securities laws and 
     the rules and regulations thereunder, including those 
     promulgated by the Commission pursuant to this section.
       ``(i) Prohibited Conduct.--
       ``(1) Prohibited acts and practices.--The Commission shall 
     issue final rules to prohibit any act or practice relating to 
     the offering of proxy advisory services by a registered proxy 
     advisory firm that the Commission determines to be unfair, 
     coercive, or abusive, including any act or practice relating 
     to--
       ``(A) conditioning a voting recommendation or other proxy 
     advisory firm recommendation on the purchase by an issuer or 
     an affiliate thereof of other services or products, of the 
     registered proxy advisory firm or any person associated with 
     such registered proxy advisory firm; and
       ``(B) modifying a voting recommendation or otherwise 
     departing from its adopted systematic procedures and 
     methodologies in the provision of proxy advisory services, 
     based on whether an issuer, or affiliate thereof, subscribes 
     or will subscribe to other services or product of the 
     registered proxy advisory firm or any person associated with 
     such organization.
       ``(2) Rule of construction.--Nothing in paragraph (1), or 
     in any rules or regulations adopted thereunder, may be 
     construed to modify, impair, or supersede the operation of 
     any of the antitrust laws (as defined in the first section of 
     the Clayton Act, except that such term includes section 5 of 
     the Federal Trade Commission Act, to the extent that such 
     section 5 applies to unfair methods of competition).
       ``(j) Statements of Financial Condition.--Each registered 
     proxy advisory firm shall, on a confidential basis, file with 
     the Commission, at intervals determined by the Commission, 
     such financial statements, certified (if required by the 
     rules or regulations of the Commission) by an independent 
     public auditor, and information concerning its financial 
     condition, as the Commission, by rule, may prescribe as 
     necessary or appropriate in the public interest or for the 
     protection of investors.
       ``(k) Annual Report.--Each registered proxy advisory firm 
     shall, at the beginning of each fiscal year of such firm, 
     report to the Commission on the number of shareholder 
     proposals its staff reviewed in the prior fiscal year, the 
     number of recommendations made in the prior fiscal year, the 
     number of staff who reviewed and made recommendations on such 
     proposals in the prior fiscal year, and the number of 
     recommendations made in the prior fiscal year where the 
     proponent of such recommendation was a client of or received 
     services from the proxy advisory firm.
       ``(l) Transparent Policies.--Each registered proxy advisory 
     firm shall file with the Commission and make publicly 
     available its methodology for the formulation of proxy voting 
     policies and voting recommendations.
       ``(m) Rules of Construction.--
       ``(1) No waiver of rights, privileges, or defenses.--
     Registration under and compliance with this section does not 
     constitute a waiver of, or otherwise diminish, any right, 
     privilege, or defense that a registered proxy advisory firm 
     may otherwise have under any provision of State or Federal 
     law, including any rule, regulation, or order thereunder.
       ``(2) No private right of action.--Nothing in this section 
     may be construed as creating any private right of action, and 
     no report filed by a registered proxy advisory firm in 
     accordance with this section or section 17 shall create a 
     private right of action under section 18 or any other 
     provision of law.
       ``(n) Regulations.--
       ``(1) New provisions.--Such rules and regulations as are 
     required by this section or are otherwise necessary to carry 
     out this section, including the application form required 
     under subsection (a)--
       ``(A) shall be issued by the Commission, not later than 180 
     days after the date of enactment of this section; and
       ``(B) shall become effective not later than 1 year after 
     the date of enactment of this section.
       ``(2) Review of existing regulations.--Not later than 270 
     days after the date of enactment of this section, the 
     Commission shall--

[[Page 20418]]

       ``(A) review its existing rules and regulations which 
     affect the operations of proxy advisory firms;
       ``(B) amend or revise such rules and regulations in 
     accordance with the purposes of this section, and issue such 
     guidance, as the Commission may prescribe as necessary or 
     appropriate in the public interest or for the protection of 
     investors; and
       ``(C) direct Commission staff to withdraw the Egan Jones 
     Proxy Services (May 27, 2004), and Institutional Shareholder 
     Services, Inc. (September 15, 2004), no-action letters.
       ``(o) Applicability.--This section, other than subsection 
     (n), which shall apply on the date of enactment of this 
     section, shall apply on the earlier of--
       ``(1) the date on which regulations are issued in final 
     form under subsection (n)(1); or
       ``(2) 270 days after the date of enactment of this 
     section.''.
       (b) Conforming Amendment.--Section 17(a)(1) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78q(a)(1)) is 
     amended by inserting ``proxy advisory firm,'' after 
     ``nationally recognized statistical rating organization,''.

     SEC. 4. COMMISSION ANNUAL REPORT.

       The Commission shall make an annual report publicly 
     available on the Commission's Internet website. Such report 
     shall, with respect to the year to which the report relates--
       (1) identify applicants for registration under section 15H 
     of the Securities Exchange Act of 1934, as added by this Act;
       (2) specify the number of and actions taken on such 
     applications;
       (3) specify the views of the Commission on the state of 
     competition, transparency, policies and methodologies, and 
     conflicts of interest among proxy advisory firms;
       (4) include the determination of the Commission with 
     regards to--
       (A) the quality of proxy advisory services issued by proxy 
     advisory firms;
       (B) the financial markets;
       (C) competition among proxy advisory firms;
       (D) the incidence of undisclosed conflicts of interest by 
     proxy advisory firms;
       (E) the process for registering as a proxy advisory firm; 
     and
       (F) such other matters relevant to the implementation of 
     this Act and the amendments made by this Act, as the 
     Commission determines necessary to bring to the attention of 
     the Congress;
       (5) identify problems, if any, that have resulted from the 
     implementation of this Act and the amendments made by this 
     Act; and
       (6) recommend solutions, including any legislative or 
     regulatory solutions, to any problems identified under 
     paragraphs (4) and (5).

  The SPEAKER pro tempore. The bill, as amended, shall be debatable for 
1 hour equally divided and controlled by the chair and ranking minority 
member of the Committee on Financial Services.
  The gentleman from Texas (Mr. Hensarling) and the gentlewoman from 
California (Ms. Maxine Waters) each will control 30 minutes.
  The Chair recognizes the gentleman from Texas.


                             General Leave

  Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days to revise and extend their remarks and submit 
extraneous material on the bill under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Texas?
  There was no objection.
  Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in strong support of H.R. 4015, the Corporate 
Governance Reform and Transparency Act of 2017, and I thank the sponsor 
of this legislation, the gentleman from Wisconsin (Mr. Duffy), the 
chairman of the Housing and Insurance Subcommittee of our committee, 
for offering this bill.
  Each year, Mr. Speaker, public companies hold shareholder meetings 
wherein shareholders vote for the companies' directors and on other 
significant corporate actions that require shareholder approval.
  Mr. Speaker, the Securities and Exchange Commission requires that, 
before these annual shareholder meetings take place, public companies 
must provide shareholders with proxy statements that include all 
important facts about matters to be voted on at a shareholder meeting. 
Many shareholders and investment advisers rely on information provided 
by proxy advisory firms to guide their votes on these matters.
  H.R. 4015 would enhance transparency in the shareholder proxy system 
by requiring proxy advisory firms to register with the SEC, disclose 
potential conflicts of interest and codes of ethics, and make their 
methodologies public.
  Mr. Speaker, this is a pure disclosure bill, nothing more, nothing 
less. Proxy firms play an outsized role in the U.S. economy in shaping 
corporate governance. They counsel pension plans, mutual funds, and 
other institutional investors about how to vote the shares of 
corporations that they own.
  With respect to institutional investors, Mr. Speaker, the share of 
institutional investor ownership was roughly 46 percent as recently as 
1987, but today, that figure is more than 75 percent; in other words, 
the volume of proxy votes for which investors are responsible has grown 
into the billions.
  In 2003, the SEC adopted a rule under the Investment Advisers Act 
that requires an investment adviser to vote in the best interest of 
their clients' own proxies. A series of SEC no-action letters give the 
investment adviser a fundamental safe harbor from liability if they use 
a proxy adviser.
  As a result, institutional investors have increasingly relied on 
proxy advisory firms to help them decide how to vote their shares. 
However, regulators, market participants, and academic observers have 
highlighted potential conflicts of interest that are inherent in the 
business models and activities of proxy advisory firms.
  The committee, for example, is aware of numerous instances whereby 
the two largest proxy advisory firms have issued vote recommendations 
to shareholders that include errors, misstatements of facts, and 
incomplete analysis.
  For example, in one instance, a company reported that, even though 
the total shareholder return the company actually had generated for its 
shareholders was 64 percent, a proxy advisory firm, Glass Lewis, 
erroneously reported this calculation to be 26 percent.
  Another company reported that ISS erroneously reported that the 
company's long-term cash awards will vest and pay out their maximum 
opportunity in the event of a change in control. Well, this was 
reported even though the company's plan had been amended and approved 
by the shareholders years earlier in a manner that would pay out at 
target upon change in control, and there are many other examples.
  Some proxy advisory firms' recommendations have been made without any 
contact to the public company at all, and then these same proxy 
advisory firms encourage companies to join their service in order to 
have the privilege to ``influence'' an advisory firm's recommendations. 
I suspect, for many people, this simply does not pass the smell test.
  An industrial company told its shareholders, Mr. Speaker: ``ISS' 
negative recommendation was based on flawed analysis of our 
compensation programs that did not appropriately take into account the 
significant declines in our CEO's pay in 2015 or the performance-based 
nature of our annual and long-term incentive compensation programs.''
  A pharmaceutical company responded to a proxy advisory firm's 
recommendations with this statement: ``For the second year in a row, 
Glass Lewis did not include its full pay for performance analysis in 
this report. For shareholders who rely only on Glass Lewis materials to 
make voting decisions, there is no discussion of the company's 
industry-leading performance over this time period.''
  Again, Mr. Speaker, there are many, many more examples like these.
  So another concern that many people have, Mr. Speaker, is that the 
two largest proxy advisory firms collectively--collectively--make up 97 
percent of the proxy advisory industry--97 percent. This monopolization 
and the lack of transparency regarding proxy advisory firms means that 
the writings, analysis, reports, and voting recommendations of these 
two firms have a disproportionate effect on fundamental corporate 
transactions like mergers or acquisitions, the approval of corporate 
directors, and shareholder proposals. In other words, these two firms 
have a huge impact on our economy.
  The bill of the gentleman from Wisconsin (Mr. Duffy) helps address 
these concerns by setting up a new regulatory regime for proxy advisory 
firms

[[Page 20419]]

that looks out for the interest of investors, shareholders, by ensuring 
they receive complete information through the proxy process and can 
better vote in a manner consistent with shareholder interest as opposed 
to the potential conflicted interest of a proxy firm.
  Mr. Duffy's bill also helps ensure that shareholders and their 
proxies have access to accurate information regarding companies by 
allowing companies to provide input on proxy recommendations. This is 
especially important for emerging growth companies that rely heavily on 
investors.
  A bad proxy recommendation in which emerging growth companies cannot 
refute the recommendation can be devastating to those emerging growth 
companies and, thus, have a harmful impact on our economy.
  In a letter to our committee, the Biotechnology Innovation 
Organization wrote: ``Small business innovators operate in a unique 
industry that values a strong relationship with investors. Yet they are 
often held to standards that are not applicable to their company and 
forced to engage in proxy fights over issues that do not add value to 
shareholders.''
  H.R. 4015 would provide for SEC oversight of proxy advisory firms, 
ensuring that they operate within appropriate boundaries and can be 
held accountable to regulators and the public.
  To be clear, Mr. Speaker, nothing in this bill permits companies to 
rewrite a proxy firm's report or forces a proxy firm to change its 
recommendation based on feedback received from the company.
  In summary, H.R. 4015 will improve transparency in the proxy system 
and enhance shareholder access to information by ensuring that proxy 
advisory firms are registered with the SEC, disclose potential 
conflicts of interest and codes of ethics, and make publicly available 
their methodologies for forming proxy recommendations and analysis. For 
every Member who believes in investor protection and supports a 
healthier economy, they should support H.R. 4015.
  Mr. Speaker, I reserve the balance of my time.

                              {time}  1315

  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume.
  Mr. Speaker, H.R. 4015, the so-called Corporate Governance Reform and 
Transparency Act, would create an untested, inappropriate, and 
burdensome regulatory framework for proxy advisory firms, making it 
much more difficult for shareholders to obtain unbiased research used 
to make well-informed voting decisions about the companies they own.
  Institutional investors, like pension funds and mutual funds, 
typically invest money on behalf of hardworking Americans in a large 
number of public companies. In exchange for their investment, companies 
provide investors with shares of ownership and a say on important 
proposed changes to how the companies are run.
  These proposals may relate to who sits on the board of directors, how 
much executives are paid, environmental practices, employee minimum 
wage, and nondiscrimination policies.
  Shareholders often hire independent researchers called proxy advisory 
firms to help inform their voting decisions on the many proposals they 
consider each year.
  H.R. 4015 contains numerous provisions that would undermine proxy 
advisory firms and the shareholders that rely on them for unbiased 
advice.
  First, H.R. 4015 would essentially fulfill the wishes of corporate 
management by regulating proxy advisory firms out of existence. The 
bill requires proxy advisory firms to register with the Securities and 
Exchange Commission and authorizes the SEC to deny applications on a 
whim.
  Additionally, H.R. 4015 would force proxy advisers to publicly 
disclose their internal proprietary research methodologies and voting 
policies, which firms invest time and money into developing.
  The bill would also require proxy advisers to hire a sort of 
compliance department dedicated entirely to the grievances of corporate 
management rather than the adviser's own shareholder clients.
  These burdensome requirements would deter new proxy advisers from 
entering the market and squeeze out smaller, cost-sensitive firms. As a 
result, shareholders would be faced with ever-increasing fees to obtain 
research from a shrinking universe of advisers.
  Second, H.R. 4015 would grant corporate management the right to 
review and weigh in on a proxy adviser's draft recommendations before 
the shareholder-clients, who pay for the recommendations, get to see a 
final report. If management raises a complaint that the adviser 
disagrees with, the bill allows management to get the last word by 
publishing its dissenting opinion in the adviser's final report. In 
other words, the bill is the equivalent of requiring that a teacher 
clear a report card with a student before sending it to his or her 
parents.
  Finally, H.R. 4015 is unnecessary in light of existing Federal 
securities laws. For example, some proxy advisers, such as the largest 
firm, Institutional Shareholder Services, are already registered and 
regulated as investment advisers under the Investment Advisers Act of 
1940. As such, they already owe heightened obligations to their 
customers; must make regular, comprehensive disclosures to regulators 
and the public; and are subject to periodic compliance examinations, 
among other legal responsibilities. Additionally, the SEC has already 
provided guidance on due diligence and oversight related to proxy 
advisers.
  H.R. 4015 would replace this well-understood guidance with a harmful 
and inappropriate regulatory regime that undermines investors' ability 
to simply exercise their shareholder rights.
  Tellingly, nothing in H.R. 4015 advances the bill's purported goals 
of ``fostering accountability, transparency, responsiveness, and 
competition in the proxy advisory firm industry.''
  Shareholders hold corporations and their management accountable by 
casting well-informed votes on important issues of corporate 
governance, including issues of diversity. For example, a recent study 
by Ernst & Young found that corporate board diversity and gender pay 
equity were key themes in the 2017 proxy season. Specifically, Ernst & 
Young found that over half of the investors it interviewed included 
diversity as a board priority in 2017, and ``proposals asking boards to 
report on and increase their board diversity are among the top 
shareholder proposals submitted this year.''
  H.R. 4015 would render these important accountability efforts 
ineffective, as the institutional shareholders driving governance 
changes would be less able to obtain the research needed to inform 
voting decisions.
  Now, I can imagine that Americans listening to this debate may get 
confused that Republicans, who have been singularly focused on 
repealing important safeguards and protections for America's consumers 
and investors, are now claiming that they are seeking to protect 
investors with these new rules, but, Mr. Speaker, if this bill truly 
helped investors, why have so many from all over America written 
letters to Congress opposing H.R. 4015?
  To name a few, the bill's opponents include public pension funds and 
government officials from California, Colorado, Connecticut, Florida, 
Illinois, New York, Ohio, Oregon, and Washington. These investors 
joined a letter from Council of Institutional Investors stating that 
H.R. 4015 ``would weaken corporate governance in the United States; 
undercut proxy advisory firms' ability to uphold their fiduciary 
obligation to their investor clients; and reorient any surviving firms 
to serve companies rather than investors.''
  Proponents of effective corporate governance, including Americans for 
Financial Reform, Consumer Federation of America, Public Citizen, and 
Principles for Responsible Investment, have similarly written to oppose 
this bill. For example, the Consumer Federation of America wrote that 
H.R. 4015 ``would empower companies to bully proxy advisory firms into 
dropping

[[Page 20420]]

their objections to management proposals or watering down their 
recommendations.''
  Private institutional investors also agree that H.R. 4015 would leave 
shareholders reliant on biased information tilted toward the interests 
of company management. Sound corporate governance requires shareholders 
to have access to impartial information when voting on key corporate 
issues.
  If our Nation's investors, who provide the capital for businesses to 
grow jobs and our economy, are unable to hold corporations accountable, 
they will be increasingly reluctant to invest. H.R. 4015 would, 
thereby, hurt the very businesses it purports to assist.
  Mr. Speaker, for these reasons, I urge my colleagues to join me in 
opposing H.R. 4015.
  Mr. Speaker, I reserve the balance of my time.
  Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds.
  Mr. Speaker, it is a historic day in America. Republicans deliver 
historic tax relief for working Americans and small businesses.
  The ranking member has articulated concern over burdensome 
requirements. I look forward to working with her now on reducing the 
burdensome requirements of the Dodd-Frank Act.
  Mr. Speaker, I yield 4 minutes to the gentleman from Michigan (Mr. 
Huizenga), the chairman of the Committee on Financial Services' 
Subcommittee on Capital Markets, Securities, and Investments.
  Mr. HUIZENGA. Mr. Speaker, as has been pointed out each year, public 
companies convene these shareholder meetings at which the companies' 
shareholders vote for the companies' directors and on other significant 
corporate actions that require shareholder approval.
  As part of this annual process, the Securities and Exchange 
Commission requires public companies to provide their shareholders with 
a proxy statement before those meetings.
  A proxy statement includes all important facts about the matters to 
be voted on at the meeting, including, for example, information on 
board of directors candidates, director compensation, executive 
compensation, related party transactions, securities ownership by 
management, and eligible shareholder proposals.
  The information contained in the statement must be filed with the SEC 
before soliciting a shareholder vote on the election of directors and 
the approval of these other corporate actions. Solicitations, whether 
by management or shareholders, must disclose all important facts about 
the issues on which the shareholders are being asked to vote.
  Institutional investors, including investment advisers to mutual 
funds and pension funds, typically hold shares in a large number of 
public companies. Each year, the investment advisers to these funds 
vote billions of shares on behalf of their clients on thousands of 
proxy ballot items.
  What you have heard about, really, was the theoretical way this is 
supposed to run. Unfortunately, that is not reality, and that is not 
what you are hearing from the other side, because in 2003, the SEC 
adopted a rule under the Investment Advisers Act of 1940, requiring an 
investment adviser that exercises voting authority over its clients' 
proxies to adopt policies and procedures designed to ensure that the 
investment adviser votes those proxies in the best interests of their 
clients. Perfect. That is exactly what they should be doing.
  The SEC's release adopting the rule clarified that ``an adviser could 
demonstrate that the vote was not a product of a conflict of interest 
if it voted client securities, in accordance with a predetermined 
policy, based upon the recommendations of an independent third party.''
  Okay so far, but here is where we see the problem. As a result, 
institutional investors increase their reliance on these proxy adviser 
firms to help them decide how to vote their shares.
  In 2004, the SEC staff, without a Commission vote, just the staff, 
issued two ``no action'' letters ``effectively blessing the practice of 
investment advisers simply voting the recommendations provided by a 
proxy adviser,'' according to SEC Commissioner Dan Gallagher.
  Largely, as a result of the SEC's regulation, proxy adviser firms now 
wield tremendous outside influence on the U.S. proxy system. Studies 
have shown that the two largest proxy adviser firms are comprised of 
approximately 97 percent of all the proxy advisory industry and can 
control a significant percentage of share votes in corporate elections, 
which is sometimes as high as 40 percent. There have been numerous 
instances where these two firms have issued vote recommendations on 
publicly traded companies that include errors, misstatements of fact, 
and incomplete analysis.
  Additionally, some proxy advisory firms' recommendations have been 
made without any sort of communication or contact with the public 
company that they are actually reviewing. In fact, these same proxy 
advisory firms even encourage companies to join their service on the 
other side of the ledger in order to have the privilege to 
``influence'' an advisory firm's recommendations.
  Members heard from the ranking member about a teacher having to check 
with a student about what their grades are going to be as a student.
  Well, what this is, Mr. Speaker, this is the teacher shaking down the 
student for their lunch money and milk money to make sure that they are 
behaving.
  So let's talk about reality here.
  Regulators, market participants, and academic observers have 
highlighted potential conflicts of interest inherent to this business 
model and activities of these proxy firms. For example, proxy advisory 
firms may feel pressured by their largest clients, who may be activist 
investors, to issue voting recommendations that reflect those clients' 
specific agendas, not the boards' or the corporations'.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. HENSARLING. Mr. Speaker, I yield an additional 1 minute to the 
gentleman from Michigan (Mr. Huizenga).
  Mr. HUIZENGA. Mr. Speaker, additionally, proxy advisory firms often 
provide voting recommendations to investment advisers on matters for 
which they also provide consulting services to public companies. Talk 
about, again, a conflict of interest.
  Some proxy advisory firms also rate or score these public companies 
on their governance structures, policies, practices, and they are 
trying to actually influence the corporate governance practices of 
these companies.
  Essentially, these proxy advisory firms have hijacked the proxy 
system by aligning themselves with activist shareholders, who also 
might be their clients, to push social and political initiatives rather 
than using shareholder votes to maximize shareholder value and 
increasing shareholder returns.

                              {time}  1330

  Well, H.R. 4015 is to the rescue on this. It would foster greater 
accountability, competition, responsiveness, and, most importantly of 
all, transparency.
  This legislation would ensure that voting recommendations at proxy 
advisory firms are, in fact, in the interest of long-term shareholders.
  So let's not misunderstand. The role of these proxy advisory firms 
serves a very important place in our economy. However, these firms 
aren't immune to conflicts of interest.
  The good work of my friend, Mr. Duffy, on H.R. 4015 will improve that 
transparency.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume.
  It is not enough that my friends on the opposite side of the aisle 
just voted to give the biggest tax breaks to America's richest 
corporations. They are back here now supporting the control and the 
dominance of corporations over our investors who need protections. The 
difference between us and them, they are for deregulation of Dodd-Frank 
and protection for consumers to support, however they can give it, the 
biggest corporations in America.

[[Page 20421]]

  Mr. Speaker, I yield 3 minutes to the gentlewoman from New York (Mrs. 
Carolyn B. Maloney), the distinguished ranking member of the 
Subcommittee on Capital Markets, Securities, and Investments.
  Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I rise in support 
of investor protection and in opposition to H.R. 4015.
  Proxy advisers provide recommendations to institutional investors on 
how to vote on board of director elections and shareholder resolutions.
  Big institutional investors are shareholders at thousands of public 
companies, and they simply don't have time to carefully review every 
single hundred-page proxy statement in detail, especially because most 
public companies hold their shareholders meetings at about the same 3-
month period.
  So institutional investors rely on proxy advisers for vote 
recommendations, which are often tailored to the investor's particular 
corporate governance preferences. They also rely on proxy firms for 
their data management on shareholder votes and corporate governance.
  This is healthy. Proxy advisers do actually have the time to 
carefully read all of the statements and proposals because they are 
professionals that are hired to do just that.
  I agree that the current regulatory system for proxy advisers is not 
perfect. Two proxy advisory firms account for 97 percent of the 
market--ISS and Glass Lewis--but, for some reason, they are regulated 
differently. ISS is a registered investment adviser, while Glass Lewis 
is not. Surely, this is not an ideal setup, so I am open to the idea of 
a better and more consistent regulatory regime for proxy advisers.
  But there are several things in this bill that concern me deeply. I 
don't see why companies should have a statutory right to receive and 
comment on a proxy adviser's draft recommendations before they are sent 
to investors. Proxy advisers aren't Federal agencies with a notice-and-
comment for private companies. They are working for private companies 
that are providing a valuable service. This is not appropriate at all.
  Asset managers that use proxy advisers also tell me that they would 
find proxy advisers a lot less useful if the proxy firm had to give the 
company an opportunity to comment on their vote recommendations before 
sending them to the asset manager.
  And a new addition to the bill is very troubling. This would raise 
the possibility of proxy advisers being forced to send the clients the 
companies' own complaints about the proxy adviser's recommendations, 
even if the complaint is completely untrue.
  This is totally inappropriate and, I would say, plain wrong. So while 
I am sympathetic to the idea that a better and more consistent 
regulatory regime could be developed, I cannot support this bill, and I 
have good company here.
  Mr. Speaker, I include in the Record a letter from the Comptroller of 
the State of New York, Comptroller DiNapoli; a statement from the AFL-
CIO of the United States of America; a statement from the Council of 
Institutional Investors; a statement from the Consumer Federation of 
America, and a statement by Glass Lewis.
  This is a troubling bill. I urge my colleagues to vote ``no'' on it. 
It is bad for safety and soundness and for good governance in this 
country.

                                                State of New York,


                              Office of the State Comptroller,

                                    Albany, NY, December 14, 2017.
     Re Opposition to H.R. 4015, Corporate Governance Reform and 
         Transparency Act of 2017.

       Dear Members of the NYS Congressional Delegation: I write 
     to express my strong opposition to H.R. 4015, the Corporate 
     Governance Reform and Transparency Act of 2017, which I 
     understand will soon be voted on by the United States House 
     of Representatives. I believe that H.R. 4015, if passed and 
     enacted, would require unnecessary and expensive regulation. 
     Further, this legislation was not promoted by those it 
     purports to protect: shareholders. It would weaken corporate 
     accountability and shareholder oversight, undercut proxy 
     advisory firms' invaluable independence, increase costs to 
     consumers of research and redirect proxy advisors to answer 
     to companies rather than the clients it serves.
       As Comptroller of the State of New York, I am the Trustee 
     of the New York State Common Retirement Fund (Fund) and the 
     administrative head of the New York State and Local 
     Retirement System (the System). As a fiduciary responsible 
     for the benefits of over one million state and local 
     government employees, retirees, and beneficiaries, I am 
     especially troubled by H.R. 4015's provisions that would 
     weaken corporate accountability and shareholder oversight.
       The system of corporate governance that has evolved in the 
     United States relies on the accountability of boards of 
     directors to shareholders, and proxy voting is a critical 
     means by which shareholders hold boards to account. 
     Currently, proxy advisors provide shareholders of 
     corporations with independent advice. The proposed bill 
     threatens that very independence, which is integral to the 
     responsible exercise of a shareholder's voting rights.
       In public comments defending H.R. 4015, members of the 
     Financial Services Committee have voiced the erroneous 
     assertions that proxy advisory firms dictate proxy voting 
     results and that institutional investors utilizing proxy 
     advisors do not make their own voting decisions. I personally 
     review and approve the Fund's customized Proxy Voting and 
     Corporate Governance Guidelines (Guidelines). In 2017, the 
     Fund voted on nearly 30,000 agenda items on its portfolio 
     companies' proxy statements, and every single one of those 
     items was voted pursuant to the guidelines which state: 
     ``proxy voting decisions are based on internal reviews of 
     available information relating to items on the ballot at each 
     company's annual meeting. . . . The Fund analyzes a variety 
     of materials from publicly available sources, which include 
     but are not limited to, U.S. Securities and Exchange 
     Commission (SEC) filings, analyst reports, relevant studies 
     and materials from proponents and opponents of shareholder 
     proposals, third-party independent perspectives and studies, 
     and analyses from several corporate governance advisory 
     firms.'' All of our proxy voting decisions are made 
     independently and in the best interest of our System's 
     participants.
       Proxy advisory firms provide cost-efficient, informed, and 
     independent research, analysis, and advice for institutional 
     shareholders, which often hold thousands of companies in 
     their investment portfolios. The independence of that advice 
     is absolutely essential, and if proxy advisors are required 
     to obtain corporate review and rebuttals before releasing 
     their research to investors, that independence would be 
     compromised, depriving public pension funds and other 
     institutional investors of a vital resource. Such a 
     requirement would also delay investors' access to research in 
     the already constricted time frame available to consider 
     ballot issues and develop independent voting decisions in an 
     informed fashion.
       As you consider your vote on this bill, please take into 
     account the concerns I have expressed on behalf of the more 
     than one million members, retirees and beneficiaries of the 
     System for whom the Fund invests.
       Thank you for your consideration of this very important 
     matter. Please feel free to contact me if you would like to 
     discuss these issues further.
           Sincerely,
                                               Thomas P. DiNapoli,
     State Comptroller.
                                  ____



                                                      AFL-CIO,

                                Washington, DC, December 14, 2017.
       Dear Representative: On behalf of the AFL-CIO, I am writing 
     to express our strong opposition to the ``Corporate 
     Governance Reform and Transparency Act of 2017'' (H.R. 4015). 
     H.R. 4015 will create a costly and untested regulatory regime 
     for proxy advisory firms that provide research and voting 
     recommendations to shareholders. The bill claims to foster 
     ``accountability, transparency, responsiveness, and 
     competition in the proxy advisory firm industry,'' while in 
     reality it will interfere with shareholders' access to 
     impartial analysis and undermine shareholders' ability to 
     hold corporate management accountable.
       For example, H.R. 4015 will undermine investors' ability to 
     hold corporate management responsible on issues such as 
     executive pay. H.R. 4015 would give corporate executives an 
     effective veto over proxy advisor recommendations by enabling 
     companies to delay vote recommendations. Corporate executives 
     will be able to object to any proxy voting recommendation 
     that is contrary to their own preferences, including votes on 
     their own executive compensation packages.
       The bill is based on the false idea that shareholders 
     blindly follow the recommendations of proxy advisors. In 
     reality, proxy advisors provide independent and unbiased 
     research on proxy votes to help investors formulate their own 
     proxy voting decisions. This flawed bill will create 
     unnecessary regulations that undermine this free flow of 
     information to investors.
       For these reasons, we strongly urge you to vote against 
     ``Corporate Governance Reform and Transparency Act of 2017'' 
     (H.R. 4015).
           Sincerely,
                                                   William Samuel,
                          Director, Government Affairs Department.

[[Page 20422]]

     
                                  ____
                           Council of Institutional Investors,

                                Washington, DC, December 12, 2017.
     Hon. Paul Ryan,
     Speaker of the House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, U.S. House of Representatives,
     Washington, DC.
     Re H.R. 4015.

       Dear Mr. Speaker and Minority Leader Pelosi: On behalf of 
     the Council of Institutional Investors (CII or Council), we 
     are writing to express our opposition to H.R. 4015, which we 
     understand will soon be voted on by the United States House 
     of Representatives.
       CII is a nonpartisan, nonprofit association of public, 
     corporate and union employee benefit funds, other employee 
     benefit plans, state and local entities charged with 
     investing public assets, and foundations and endowments with 
     combined assets under management exceeding $3 trillion. CII's 
     member funds include major long-term shareowners with a duty 
     to protect the retirement savings of millions of workers and 
     their families. The Council's associate members include a 
     range of asset managers with more than $20 trillion in assets 
     under management.
       Many of our members and other institutional investors 
     voluntary contract with proxy advisory firms to obtain 
     research reports to assist the funds in voting their proxies 
     according to the funds' own proxy voting guidelines. This 
     contractual relationship provides investors a cost-efficient 
     means of obtaining supplemental research on proxy voting 
     issues, which is particularly beneficial since many funds 
     hold thousands of companies in their investment portfolios.
       H.R. 4015 would establish a new federal regulatory scheme 
     for proxy advisory firms that would (1) grant ``companies,'' 
     apparently meaning corporate management, the right to review 
     the proxy advisory firms research reports before the paying 
     customers--investors--receive the reports; (2) mandate that 
     the proxy advisory firms hire an ombudsman to receive and 
     resolve corporation's complaints; and (3) if the ombudsman is 
     unable to resolve the complaints, and if the company 
     management submits a written request, proxy advisory firms 
     would be required to publish company management's dissenting 
     statement. These provisions would result in the federal 
     government interposing corporate management between investors 
     and those proxy advisory firms that investors hire to provide 
     them with research on issues, such as executive compensation, 
     in which corporate management can have its own interests, 
     sometimes in conflict with investors and with the corporate 
     entity.
       Setting aside whether the provisions of H.R. 4015 are 
     consistent with First Amendment rights of freedom of speech, 
     the provisions are not practical. The provisions would 
     require proxy advisory firms to provide the management teams 
     of more than 4,000 corporations the opportunity to present 
     detailed comments on the firm's reports in a matter of weeks 
     before the reports are provided to investors. Thus, investors 
     would have limited time to analyze the reports in the context 
     of their own proxy voting guidelines to arrive at informed 
     voting decisions. Time is already tight, particularly in the 
     spring ``proxy season,'' due to the limited period between a 
     corporations' publication of the annual meeting proxy 
     materials and the date in which investors are permitted to 
     vote on proxy issues.
       In addition, the provisions of H.R. 4015 would likely 
     result in fewer market participants in the proxy advisory 
     firm industry. The provisions would add significant costs 
     increasing barriers to new entrants and potentially leading 
     some existing firms to exit the industry altogether.
       We also note that the United States Department of Treasury 
     recently performed extensive outreach to identify views of 
     company management teams and other market participants on 
     proxy advisory firms in connection with its recently issued 
     report to President Trump on ``A Financial System that 
     Creates Economic Opportunities, Capital Markets.'' In its 
     report the Treasury found that ``institutional investors, who 
     pay for proxy advice and are responsible for voting 
     decisions, find the [proxy advisory firm] services valuable, 
     especially in sorting through the lengthy and significant 
     disclosures contained in proxy statements.'' More 
     significantly, the Treasury did not call for legislation of 
     the proxy advisory firm industry.
       Finally, we have attached for your information and review a 
     November 9, 2017 letter signed by 45 investors and investor 
     organizations describing in more detail the basis for their 
     strong opposition to H.R. 4015.
       Thank you for considering our views. We would welcome the 
     opportunity to discuss our perspective on this important 
     issue with you or your staff in more detail.
           Sincerely,
                                               Jeffrey P. Mahoney,
     General Counsel.
                                  ____



                               Consumer Federation of America,

                                                December 18, 2017.
     Re Vote No on H.R. 4015, the ``Corporate Governance 
         Transparency Act''.

       Dear Representative: We understand the House is scheduled 
     to vote this week on legislation (H.R. 4015, the Corporate 
     Governance Reform and Transparency Act) that would undermine 
     the ability of shareholders to get reliable, independent 
     analysis of proxy issues on which they are asked to vote. We 
     urge you to vote no.
       Although H.R. 4015 is presented as a bill to regulate proxy 
     advisory firms in order to better protect investors and the 
     economy, its effect would be to undermine their independence, 
     simultaneously increasing their costs and undermining their 
     value to the investors who use their services. Indeed, 
     several of the bill's provisions are specifically designed to 
     give the companies whose proxy proposals the firms are 
     supposed to independently analyze greater input into and 
     influence over their recommendations.
       It would, for example, require proxy advisory firms to give 
     companies a first look at their draft recommendations and an 
     opportunity to comment on them before any recommendation to 
     investors is finalized.
       Proxy advisory firms would also be required to employ an 
     ombudsman to take complaints about the accuracy of the voting 
     materials from the companies that are subjects of the 
     recommendations, and provide those companies with an 
     opportunity to include a comment in materials sent to 
     investors if their complaints are not resolved to their 
     satisfaction.
       Together, these provisions would empower companies to bully 
     proxy advisory firms into dropping their objections to 
     management proposals or watering down their recommendations.
       We certainly agree that proxy advisory firms should be 
     subject to appropriate regulation. Rather than create a 
     bureaucratic new regulatory regime for a handful of firms, 
     however, we believe that is better achieved by regulating 
     these firms as investment advisers, with a fiduciary duty to 
     act in the best interests of the investors who rely on their 
     services and an obligation to minimize and appropriately 
     manage conflicts of interest.
       For these reasons, we urge you to vote no on this misguided 
     and misdirected legislation. Please feel free to contact me 
     directly if you have questions about our position on this 
     bill.
           Respectfully submitted,
                                                    Barbara Roper,
     Director of Investor Protection.
                                  ____



                                                  Glass Lewis,

                                                December 18, 2017.
     Re HR 4015--Corporate Governance Reform and Transparency Act 
         of 2017.

     Hon. Paul Ryan,
     Speaker, House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives,
     Washington, DC.
       Dear Speaker Ryan and Leader Pelosi: I am writing to 
     express opposition to HR 4015, the Corporate Governance and 
     Reform and Transparency Act of 2017, which seeks to exert 
     additional regulatory control over proxy advisory firms at 
     the expense of investors. I urge a no vote when this 
     legislation is considered by the full House of 
     Representatives.
       Shareholder voting, a regulatory obligation for U.S. 
     registered investment advisors, is a primary means by which a 
     public company's owners can influence company operations, 
     corporate governance and activities of corporate social 
     responsibility. As such, it is important for institutional 
     investors (pension funds, mutual funds and other asset 
     managers) to have access to the resources--including unbiased 
     proxy research--that enable them to execute their votes in 
     accordance with their views.
       Glass Lewis is dedicated to helping institutional 
     shareholders of public companies better understand and 
     connect directly with the companies in which they invest. Our 
     duty, as a proxy advisory firm, is to support--not usurp--the 
     role of our clients as investors/owners, a distinction we 
     take very seriously. It is reflected in how we develop and 
     update our proxy voting policies, create our research, and 
     engage with public companies, shareholders and other 
     stakeholders.
       H.R. 4015, as drafted, would damage investors in public 
     companies by attempting to silence research firms that 
     provide investors data, analysis and independent voting 
     recommendations to support their fiduciary activities related 
     to proxy voting. It would require the SEC to develop a new 
     registration scheme that would compel proxy advisory firms to 
     share their proprietary research reports with the subject 
     public companies prior to distributing those reports to their 
     investor clients--thereby granting the subject companies an 
     unprecedented right of prior review. The proposed legislation 
     also would establish a system whereby issuers could dispute 
     recommendations of proxy advisory firms before the investor 
     clients of proxy advisory firms were granted access to the 
     research.
       No other investment research analysts are subject to these 
     prior review rules; in fact, FINRA prohibits investment 
     research analysts from doing this to avoid conflicts of 
     interest.
       In SEC Staff Legal Bulletin No. 20 (June 30, 2014), the SEC 
     restated that investor consumers of proxy advisory firm 
     services are

[[Page 20423]]

     responsible for holding their advisors accountable. These 
     investor consumers are satisfied with the current system. 
     Indeed, it is telling that the call for regulating proxy 
     advisory firms is coming not from investors but from the 
     companies that are the subjects of the advisors' reports.
       In October, the United States Department of Treasury issued 
     its report to President Trump on ``A Financial System that 
     Creates Economic Opportunities, Capital Markets.'' As part of 
     that report, extensive outreach was undertaken to identify 
     views of company management teams and other market 
     participants on the role and activities of proxy advisors. 
     Treasury found that ``institutional investors, who pay for 
     proxy advice and are responsible for voting decisions, find 
     the [proxy advisory firm] services valuable, especially in 
     sorting through the lengthy and significant disclosures 
     contained in proxy statements.'' More significantly, the 
     Treasury did not call for legislation of the proxy advisory 
     industry.
       Further, in 2012, the European Securities and Markets 
     Authority (ESMA), which comprises all the securities 
     regulators in Europe, and the Canadian Securities 
     Administrators (CSA) conducted comprehensive reviews of the 
     proxy advisory industry and its activities. Both regulatory 
     agencies concluded that neither binding nor quasi-binding 
     regulation of proxy advisory firm activity was warranted. 
     ESMA and the CSA each recommended the development of an 
     industry code of conduct. In accordance with the specific 
     direction of these regulators, the Best Practice Principles 
     for Shareholder Voting Research (``Principles'') were 
     launched in 2014.
       Glass Lewis and ISS, the largest U.S.-based proxy advisory 
     firms, apply the Principles globally. The Principles 
     encourage transparency, conflict management and disclosure, 
     and engagement with companies when appropriate. Glass Lewis 
     meets the' Principles' standards by making its full 
     guidelines; research approach and methodologies; conflict 
     avoidance and disclosure policies; and public-company 
     engagement procedures available publicly on its website.
       Most recently, in an effort to ensure that the Principles 
     remain fully aligned with applicable regulation, a global 
     consultation was launched in order to seek views from 
     investors and companies on whether the Principles have been 
     effective in ensuring the integrity and efficiency of the 
     services provided by shareholder voting analysts and 
     advisors. The review is being carried out by a Steering Group 
     comprised of five representatives of the current Principles' 
     signatories, chaired by Chris Hodge, former Director of 
     Corporate Governance at the Financial Reporting Council in 
     the UK, and supported by an Advisory Panel whose members have 
     broad experience and knowledge of investors, companies and 
     different national markets, including the United States. By 
     way of example, one of the key items on the agenda is the 
     consideration of what actions will be needed in order to 
     ensure the Principles are fully compatible with the revised 
     EU Shareholder Rights Directive, which includes mandatory 
     requirements for proxy advisors operating in the EU, 
     scheduled to take effect in 2019.
       The Corporate Governance Reform and Transparency Act is an 
     attack on investors to the detriment of their beneficiaries--
     notably the millions of U.S. teachers, municipal employees, 
     law enforcement officers, firefighters, retirees and mutual 
     funds investors. If enacted, it will result in less informed, 
     more time-constrained investors who will be less able to 
     properly hold companies accountable for poor returns, 
     overpaying executives at underperforming companies and 
     ignoring shareholders and shareholder interests.
       Glass Lewis joins with the many pension funds, 
     institutional investors, and consumer advocates urging you to 
     vote no on HR 4015 to protect shareholder rights.
           Sincerely,
                                               Katherine H. Rabin,
                                          Chief Executive Officer.

  Mr. HENSARLING. Mr. Speaker, I yield 3 minutes to the gentleman from 
Arkansas (Mr. Hill), our Republican Conference whip.
  Mr. HILL. Mr. Speaker, I rise in support today of the Corporate 
Governance Reform and Transparency Act of 2017, and I appreciate my 
good friend, Sean Duffy's work on it.
  Over the past 3 decades, I have advocated for responsible shareholder 
activism and urged for corporate boards of directors to perform their 
responsibility of careful stewardship, particularly in their essential 
functions in evaluating corporate strategy, hiring able hardworking 
executive management, and, critically, capital allocation.
  For example, as Berkshire Hathaway's CEO, Warren Buffett, recommends, 
corporate compensation committees must be composed of ``saber-toothed 
tigers,'' not ``house cats,'' in their work.
  Likewise, investors must take their responsibility to hold boards 
accountable for their irreplaceable role in maximizing returns for 
shareholders, while executing a corporate strategy that balances 
shareholder returns with employees and customers.
  So the question is: How can investors effectively lower agency costs 
and actively meet this accountability mission?
  For 20 years, this has been a much-discussed area by thoughtful 
experts like Warren Buffett, ISS founder Robert Monks, Marty Lipton, 
and Lawrence Cunningham. Grad schools at UCLA, Stanford, Harvard, Yale 
all researched this challenge. Organizations of institutional investors 
and corporate directors all proffer best practices.
  And how do we best align these interests for this mission, but make 
conflicts of interest readily apparent?
  The role of proxy advisory firms in the U.S. economy has grown over 
the last 2 decades and is a major shaper of corporate governance, and 
it is of national importance. These firms counsel our pension plans, 
our mutual funds, other institutional investors, which are more and 
more in the market; 75 percent of the market, compared to when Robert 
Monks started thinking about the idea in the late 1980s.
  Under the current system, two proxy advisory firms now have 97 
percent of the market, Mr. Speaker, and this monopolization and the 
lack of transparency regarding their work means that the writings, 
analyses, reports, and vote recommendations of just these two firms 
have a disproportionate effect on the fundamental corporate 
transactions, like mergers and acquisitions, the approval of corporate 
directors, and other shareholder proposals.
  Also, this has created more of a checklist mentality in the 
boardroom. Directors today need information, yes, but, more 
importantly, they need wisdom. And the proxy advisory firms are driving 
people in boardrooms, in my view, to more of a checklist mentality, 
regulatory mentality, and less using their business judgment and wisdom 
to guide our public companies.
  Proxy advisory firms aren't immune to conflicts of interest.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. HENSARLING. Mr. Speaker, I yield an additional 30 seconds to the 
gentleman from Arkansas.
  Mr. HILL. Mr. Speaker, these conflicts are provided by providing 
additional recommendations to the very firms that they are rating.
  So, Mr. Speaker, we need balance in this arena, and I think Mr. 
Duffy's bill provides a step toward that balance, an improvement in 
transparency in the proxy system, thereby enhancing shareholder access 
to important investment information. I appreciate his work on it. I 
thank him for his work in our committee.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield 3 minutes to 
the gentleman from Georgia (Mr. David Scott), a hardworking member of 
the Financial Services Committee.
  Mr. DAVID SCOTT of Georgia. Mr. Speaker, this is indeed a very, very 
important issue. I come at this from one who has worked with my good 
friend, Mr. Duffy, on this issue. More than that, I voted with Mr. 
Duffy for this bill in committee.
  However, there are some troubling things about this bill that could 
do one very damaging thing. It could put many of these proxy firms out 
of business.
  I want to take a moment to explain what the danger is in the bill 
that made me change my mind. I chatted with Mr. Duffy about it. He 
understands it. This is not to shed any negative light on his 
objective, but it is what he is doing to get to that objective that 
disturbs me and, I think, should disturb the people of this Congress 
and this country, and that is this:
  It could be summed up in, basically, 2 words: unilateral authority.
  That is what this bill provides to the Securities and Exchange 
Commission: unilateral authority to set the requirements, first of all, 
for what it means to be a proxy firm.
  When you put unilateral authority into the hands of a regulatory 
agency,

[[Page 20424]]

we know the damage that can be done. And I agree that there may be some 
things that need to be done, but these words, ``unilateral authority,'' 
would mean that the Securities and Exchange Commission could establish 
any number of hurdles for these proxy advisory firms to jump over in 
order to just stay in business.
  Unilateral authority to do such things as setting financial 
requirements, one would say that nothing may be wrong with that; but 
other hurdles that the Securities and Exchange Commission could put up 
likely will be arbitrary, illogical, such as them setting requirements 
for how many employees a proxy firm should have.
  Mr. Speaker, this is a step too far, especially during a time in our 
country when Federal regulators have used their powers to attack the 
American people at any and every level.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield an additional 
30 seconds to the gentleman from Georgia.
  Mr. DAVID SCOTT of Georgia. Mr. Speaker, second, let me give you an 
example of how you can put too much regulatory authority into an 
agency.
  When HHS, this year, used their powers to attack women's health, that 
happened; or when the Department of Justice used their powers to 
reverse community policing reform at the Department of Justice.
  All I am saying in this particular argument, Mr. Speaker, is that Mr. 
Duffy is well-intended, but this goes too far, and I urge my colleagues 
to reject and vote ``no'' on this bill.
  Mr. HENSARLING. Mr. Speaker, I yield 4 minutes to the gentleman from 
North Carolina (Mr. Budd).
  Mr. BUDD. Mr. Speaker, I rise today in support of H.R. 4015. I thank 
Chairman Duffy for his leadership on this bipartisan piece of 
legislation, which will improve our country's shareholder proxy system.
  Since the early 2000s, we have seen market share and the shareholder 
proxy system consolidate, essentially, into a duopoly, as two firms 
control 97 percent of the market, so, under the current system, 
potential conflicts of interest abound.
  For example, proxy advisory firms that provide voting recommendations 
to advisers often provide consulting services to those same public 
companies. So wouldn't it make sense that they at least notify their 
shareholders of this potential conflict of interest?
  Well, right now, while the SEC has offered guidance on this problem, 
the proxy firm wouldn't be required to do so. We need to get this bill 
on the books just to address this problem.

                              {time}  1345

  This bill is also timely because we have seen proxy firms align 
themselves with political causes, unions, and interest groups that do 
not always represent their shareholders' best interests. Shareholders 
oftentimes aren't even aware of these conflicts. Again, reform is 
needed.
  So it should go without saying, Mr. Speaker, that the two problems 
outlined above pose problems for the shareholder and for the average 
investor. We cannot continue to allow the security laws and processes 
to be wrapped in a service of political agenda.
  Mr. Speaker, we have dealt with this issue in the Financial Services 
Committee on a number of fronts with regard to disclosure of 
information that is being weaponized against public companies, from 
mining to conflict minerals. It is time to deal with the proxy issue 
today.
  The number of public companies has fallen in recent years. It was 
never easy to be public, to be subject to the financial markets and the 
pressures that come from being accountable to your shareholders. This 
issue, the proxy issue, is part of a larger tapestry of challenges that 
public companies face. They are increasingly choosing not to play the 
game. They are getting capital from dark pools; they are getting 
capital from hedge funds; and they are just staying private. That puts 
investment opportunities in the hands of the 1 percent, and that leaves 
retail investors out in the cold.
  Mr. Speaker, my constituents and North Carolina shareholders are from 
the part-time trader to the full-time trader. They deserve better than 
this. Luckily, this body can do something to address these problems, 
and that is where Chairman Duffy's bipartisanship legislation comes 
into play. His bill will bring about much-needed accountability, 
competition, and, most importantly, transparency in the proxy advisory 
firm industry.
  This bill also protects clients and their financial future from being 
influenced by activists and outside interest groups. His legislation 
accomplishes this by mandating that proxy advisory firms register with 
the SEC, disclose potential conflicts of interest to the shareholders, 
and make their methods for coming up with proxy recommendations 
available to the public.
  Two proxy advisory firms should not have this much control of the 
marketplace and the power to disproportionately affect fundamental 
corporate transactions. This bill is a win for the consumer, a win for 
the free market, and should be a bipartisan priority for this body.
  A number of outside commentators have been clear that the proxy 
industry has gained a worrisome degree of authority over companies. In 
fact, Columbia Law Professor Jeffrey Gordon said that the burden of 
annual voting would lead investors, particularly institutional 
investors, to farm out evaluation of most pay plans to a handful of 
proxy advisory firms who, themselves, will seek to economize on those 
very proxy review costs. There are a host of others who are saying 
these same things about the way things are today in proxy voting.
  Ultimately, the shareholder is the one who suffers. We should put a 
stop to it.
  Mr. Speaker, once again, I want to thank Chairman Duffy for leading 
the fight on this issue, and I urge adoption of his legislation.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield 3 minutes to 
the gentleman from Massachusetts (Mr. Capuano), an invaluable member of 
the Financial Services Committee.
  Mr. CAPUANO. Mr. Speaker, I thank the gentlewoman for yielding time 
to me.
  Mr. Speaker, this is one of those mundane issues that 95 percent of 
America doesn't understand. I didn't understand much about it a while 
back because I don't have any proxy advisers. I do have money in 
retirement funds. I do get those 100-page documents in the mail, 
saying, ``We are having a proxy fight and you should read it,'' in the 
smallest print possible, and I do what 95 percent of America does when 
I get those: I throw them right in the trash.
  Now, that doesn't make me smart. It just means I can't read through 
that stuff. I can't understand what they are doing with my pension 
funds. I kind of have to go on faith that they are not sticking it to 
me. That is what most of us do, and most anybody listening to this, 
that is the only thing they have to do with this issue.
  So I went out and found out what is a proxy adviser. Here is what it 
is.
  The pension funds--not always, but mostly pension funds--that invest 
my pension money do it all across the board. Many of them are small. 
Some of them are big. And when it comes time to reading those 100-page 
documents and the thousands of companies they invest in, they go and 
hire somebody to help them do it, a proxy adviser. They go through 
those documents with accountants and actuaries and give them advice. 
Not a demand--advice.
  Now, I don't know about you. I get advice from my lawyer on occasion. 
I get advice from my accountant on occasion. I get advice from my 
priest on occasion. And it is none of your damn business what advice 
they give me, because two of them I am paying and one of them loves me.
  When a person or an entity hires someone else to give them advice, it 
is no one else's business what that is. This bill says it is. It now 
would be the business of the company about whom they are giving the 
advice.
  I paid them. Why should I share that information with you? That is 
what a

[[Page 20425]]

proxy adviser is. It is not some big swami sitting in the back sticking 
it to big corporations. It is a paid adviser.
  Now, we have heard, oh, terrible things that these advisers do.
  Who do they work for? Well, they work for pension funds--mostly 
pension funds, by the way, that are public pension funds, not all. They 
have the pension money of teachers, firefighters, police officers, 
trash collectors, water workers all across this country.
  And then there are private pension funds that work for union members: 
the AFL-CIO, the Bricklayers, the SEIU. That is who is doing most of 
this investing on behalf of little people like me who don't have the 
knowledge or the time to be able to go through 100 pages of really fine 
print, really detailed stuff, to determine which person I should vote 
for on a board of a company I don't know much about. That is it.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield an additional 
30 seconds to the gentleman from Massachusetts.
  Mr. CAPUANO. Mr. Speaker, let's figure out who are the worst of the 
worst of the people who hire these people.
  Well, it turns out the Dominican Sisters hire a proxy adviser. Oh, 
they are put together for the very purpose of ripping the heart out of 
corporate America. Those Dominican Sisters, they are evil investors.
  Let's not forget the Daughters of Charity. Oh, terrible, terrible 
people. They are so busy caring for the poorest people in the world 
that they take time out of that in order to find a way to stick it to 
the biggest corporate people in the country.
  The SPEAKER pro tempore. The time of the gentleman has again expired.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield an additional 
30 seconds to the gentleman from Massachusetts.
  Mr. CAPUANO. Mr. Speaker, they use proxy advisers.
  Let me see. Who wants this bill? Every corporation in America. Why? 
They don't want you knowing what they are doing.
  Let's see. Whose side am I on? I think if I have a choice between 
being on the side of the biggest corporations in this country or being 
with the Dominican Sisters, I am choosing the Dominican Sisters. They 
are doing God's work. They use and need proxy advisers. Leave them 
alone.
  Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say 
that, if the gentleman is so busy he can't read a 100-page proxy 
statement, perhaps he could read a 20-page bill and he would realize 
that his comments have almost absolutely nothing to do with the bill 
whatsoever.
  Mr. Speaker, I yield 5 minutes to the gentleman from Wisconsin (Mr. 
Duffy), the sponsor of the legislation and the chairman of the 
Financial Services Subcommittee on Housing and Insurance.
  Mr. DUFFY. Mr. Speaker, I appreciate the gentleman for yielding time 
to me, the chairman of Financial Services, Mr. Hensarling. I appreciate 
his leadership and stewardship on our committee.
  Mr. Speaker, I want to get into the bill in a second, but I can't let 
the Dominican Sisters reference go.
  It is not the Dominican Sisters who are using proxy advisers. It is 
the largest financial investors in the world that are using these 
advisers, which we are going to get into in a little bit.
  And if you want to talk about sisters, I will talk about the Little 
Sisters of the Poor, who have been ravaged by ObamaCare because they 
can't practice their faith, if you want to talk about sisters. We are 
not going to go there today.
  Mr. Speaker, we are in a situation where, my friends, if you listen 
to the debate, you might say, ``Well, Republicans are asking for a 
little more regulation in the proxy advisory space,'' and Democrats, 
miraculously, are saying, ``We don't want any regulation.''
  Well, our concern is that you have consolidated power in two 
companies that control 97 percent of the industry, and some have made 
the claim and the allegation that there might be political motivations 
behind both--or at least one--of these massive proxy advisory firms, 
because Glass Lewis is owned by the Ontario Teachers' Pension fund, and 
they might have a political agenda that might affect the 
recommendations that have a massive impact on American corporate 
governance. Maybe that could be the distinction between the two parties 
in today's debate.
  Mr. Speaker, we have covered this quite a bit, but I want to go into 
it again. The role of proxy advisory firms in the U.S. economy is 
incredibly important. It is important stuff.
  These firms counsel pension plans and mutual funds and institutional 
investors on how to vote their shares. No one is trying to get rid of 
proxy advisory firms. We think they are a good thing, but we think they 
should have a little bit of regulation and a little bit of oversight.
  I think it is troubling, when you look at the share of institutional 
ownership, in 1987, it was 46 percent. Today, that has grown to 75 
percent, meaning that institutional investors control billions of 
shares.
  There was a recent study that was done by Stanford that says that 
asset managers with $100 billion or more under their control only make 
10 percent of the decisions on these proxy issues, meaning they 
outsource 90 percent of the decisions to one of two firms, 
consolidating great power in these proxy advisory firms.
  This was pointed out before as well, but, again, two firms, 97 
percent of the market share, writing analysis reports, voting 
recommendations that affect the fundamentals of corporate governance, 
mergers, acquisitions, approval of corporate directors, and shareholder 
proposals.
  What is of greatest concern is that these firms are not free of 
conflicts of interest. For example, in addition to providing 
recommendations to institutional investors about how to vote, proxy 
advisory firms may advise companies about corporate governance issues, 
rate companies on corporate governance, help companies improve those 
ratings, and advise proponents about how to frame a proposal to get the 
most votes. They are playing every side of the issue. They are getting 
every dollar from anybody who cares about the corporate governance 
space. They play everybody. And if you want access, you pay.
  I am going to give you an example in just a little bit of one of the 
hundreds of letters that I have received on this issue. But before I do 
that, I think it is important to say: What are we asking for? What is 
the radical idea that we brought to the floor today, which, by the way, 
had six Democrats' support?
  Mr. Scott commented about his support as well, and I know he had an 
issue about the cost that this would have on proxy advisory firms; but 
the CBO, which I rarely quote, did a study on this and said the cost to 
proxy advisory firms of this bill is minimal, if anything. I think his 
concern might be misplaced.
  But what are we asking to do here? We are asking for accountability. 
We are asking for transparency, responsiveness, and competition in the 
proxy advisory space. By doing that, we will improve corporate 
governance, and, in the end, we are going to protect investors.
  Specifically, again, this bipartisan bill will ensure that proxy 
advisory firms are registered with the SEC. They will disclose 
potential conflicts of interest. They will maintain a code of ethics 
and make publicly available their methodologies for formulating their 
proxy recommendations.
  The SPEAKER pro tempore (Mr. Holding). The time of the gentleman has 
expired.
  Mr. HENSARLING. Mr. Speaker, I yield an additional 1 minute to the 
gentleman from Wisconsin.
  Mr. DUFFY. Mr. Speaker, I don't know what my friends across the aisle 
have about maintaining a code of ethics or disclosing potential 
conflicts of interest or instituting an ombudsman to resolve issues 
that might come up. This is commonsense stuff. This is good governance, 
and I would encourage all of my friends across the aisle to join us.

[[Page 20426]]

  Mr. Speaker, I want to read one part of a letter that I received that 
I think embodies what is going on in corporate America.

                              {time}  1400

  I am not going to give the name of the company, but it says:

       Upon contacting ISS and seeking explanation on one of the 
     recommendations, we were told there was a firewall between 
     the ISS recommendation group and the ISS group that deals 
     with corporate matters. Ultimately, we were advised that if 
     we were willing to join ISS, which includes payment of a 
     relatively substantial amount of money, we could have input 
     in the recommendations before they were made.

  So, Mr. Speaker, pay for the input.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. HENSARLING. Mr. Speaker, I yield an additional 1 minute to the 
gentleman from Wisconsin.
  Mr. DUFFY. Mr. Speaker, it goes on to say:

       Meanwhile, during our latest discussions we were again 
     advised that we could avoid some issues by subscribing to ISS 
     corporate services and thereby have some input before such 
     recommendations are published.

  Mr. Speaker, of course, such a subscription would entail big payouts.
  It goes on to say:

       On the one hand, ISS makes wholly unsupportable, 
     unreasonable, and irrational recommendations regarding 
     corporate elections without investigation, regulatory 
     support, or even contact with the victim company. While, on 
     the other hand, seeking fees from the victim company for the 
     privilege of influencing ISS's recommendations.

  Mr. Speaker, so what you have here is you have the mafia on the 
streets. So, lo and behold, your little shop on the street corner gets 
burglarized at 10 o'clock one night and at 8 o'clock in the morning, 
and lo and behold, the thugs come in and say: Do you want to buy some 
insurance? Do you want to buy some protection? Pay up. We will keep you 
safe. ISS, Glass Lewis, you pay up, and we can help you with your 
recommendation. We can help you with your ratings.
  Mr. Speaker, this is thuggery.
  Let's have a little commonsense oversight in this space. It is a good 
bill.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume.
  Mr. Speaker, the gentleman talked about what is happening in 
corporate America. They are dancing in the streets after that big tax 
cut that was just given by my friends on the opposite side of the 
aisle.
  As to just a couple of companies--or too few companies--that are 
doing the advising for these investors, it was just a week or so ago 
that my friends on the opposite side of the aisle came here 
representing one company, Berkshire Hathaway, where they were asking 
this Congress to allow them to charge higher interest rates on the most 
vulnerable people in our population, with high interest rates and the 
terrible foreclosure practices all over this manufactured housing that 
Berkshire Hathaway is selling to these most vulnerable people in our 
society.
  Mr. Speaker, I yield 3 minutes to the distinguished gentleman from 
Texas (Mr. Al Green), who is the ranking member of the Subcommittee on 
Oversight and Investigations.
  Mr. AL GREEN of Texas. Mr. Speaker, I thank the ranking member for 
yielding.
  Mr. Speaker, I would also like to note that the ranking member, the 
Honorable Maxine Waters, is often the sentinel on watch. She is the 
person who is there to protect investors. She is there to protect 
persons who might, but for her absence, be taken advantage of. So I am 
honored to speak with her and to stand with her.
  Mr. Speaker, I oppose this bill today because this bill epitomizes 
what I believe is a business model that allows corporate America to 
take advantage of investors. This business model is one that has been 
perpetrated and perpetuated by my colleagues on the other side. This 
business model is one that surfaced in 2008, when the credit rating 
agencies became captives of the businesses that were providing the 
instruments that were to be rated. They were catering to the businesses 
to the detriment of the investors.
  I believe this business model is one that allows the fiduciary rule 
to be compromised. The fiduciary rule simply said that, if you are 
working on behalf of an investor, you can't put your interest ahead of 
the investor's interest. That rule was compromised by my colleagues on 
the other side.
  So today they again come with another business model that will allow 
investors to be taken advantage of. Caveat emptor is going to apply in 
a way that it has never been seen before as it will relate to these 
investors.
  It is time for us to prevent the business model of allowing investors 
to be taken advantage of and to present a business model that allows 
the investor to have the benefit of advice from the proxy. That is what 
we have currently. Let's not change the business model. Let's make sure 
that the investor is properly protected.
  Mr. HENSARLING. Mr. Speaker, I reserve the balance of my time.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield 3 minutes to 
the gentlewoman from Texas (Ms. Jackson Lee.)
  Ms. JACKSON LEE. Mr. Speaker, I thank the gentlewoman from California 
for yielding.
  It is certainly my pleasure to be on the side of the gentlewoman from 
California. Every time we have got in these fights to attack Dodd-
Frank, she has been on the right side of the issue.
  So let me clearly, though my voice is a little raspy, speak on behalf 
of those, as my colleagues have spoken about, of us who certainly have 
a degree of education and receive those long statements where there are 
big fights and the print is so small.
  I will tell you that the proxy advisers are representing not us, but 
those vulnerable pensioners who put everything they have ever had in 
that pot, and those advisers give those public pension funds the 
counsel and advice that is necessary.
  First of all, this bill is entirely impractical. Pension plans and 
other institutional investors often hold shares in thousands of public 
companies. The bill will require proxy advisory firms, who provide 
voting recommendations to these shareholders, to provide the management 
with more than 4,000 public companies with the opportunity to present 
detailed comments on the firm's draft recommendations before paying 
shareholders receive a final report.
  It also wants to burden them with all kinds of extra trinkets that 
they have to give information about, an unprecedented right to weigh in 
by the corporations on voting recommendations, executive compensation, 
nondiscrimination policies. Again, the proxy advisers work with the 
public pension funds.
  Who are they?
  They are the coal miners and the bus drivers. They are, in fact, 
those teachers, firemen, and policemen. They are Americans who depend 
upon their pensions.
  Mr. Speaker, the reason that I wanted to stand on this floor today 
is, just a few minutes ago, we again voted for this catastrophic tax 
bill. I wanted to tie this to, as I heard my good friend from Texas, 
jumping up and celebrating. I assume they will run to the White House 
when this bill is passed in one way or the other.
  Let me describe to you what I believe is the scenario on the tax 
bill. We all like cliffhanger movies. Cliffhanger movies always get the 
family together to be able to tell the story or to sit in the movie and 
look at the cliffhanger because it is always the heroes that win on a 
cliffhanger. You are waiting for the hero to launch down and save 
everyone.
  Here is the Republican cliffhanger: it is this tax bill, and the 
cliffhanger is you are going up a mountain. As you go up the mountain, 
here are the Republicans and this tax bill that is going to take away 
millions of dollars from Medicaid.
  The SPEAKER pro tempore. The time of the gentlewoman has expired.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield an additional 
30 seconds to the gentlewoman from Texas.
  Ms. JACKSON LEE. They are throwing over the cliff the Medicaid 
recipients, people with dementia. My good

[[Page 20427]]

friend who has ALS, who is in a wheelchair, thrown over the cliff. They 
are throwing over teachers. They are throwing over individuals who are 
believing them that they are going to get jobs, but they are getting no 
jobs. They are throwing over families, working class families, 86 
million of them--throwing them over the cliff.
  It is not a good ending. It is a tragic ending, and they are standing 
one by one by one and throwing them over this cliff with this phony tax 
bill. They are not going to be able to do what is right for those who 
are truly in need. The benefits for those who are working Americans is 
temporary, and those of corporations is forever.
  Mr. HENSARLING. Mr. Speaker, I reserve the balance of my time.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume.
  Mr. Speaker, I include in the Record letters from the California 
Public Employees' Retirement System, the California State Teachers' 
Retirement System, the Ohio Public Employees Retirement System, and the 
National Conference on Public Employee Retirement Systems.

                           California Public Employees' Retirement


                                      System Executive Office,

                                Sacramento, CA, December 18, 2017.
     Subject H.R. 4015, The ``Corporate Governance Reform and 
         Transparency Act of 2017''.

     Hon. Kevin McCarthy,
     Majority Leader, House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives,
     Washington, DC.
       Dear Leaders McCarthy and Pelosi: On behalf of the 
     California Public Employees' Retirement System (CalPERS), I 
     write to express our opposition to H.R. 4015, the ``Corporate 
     Governance Reform and Transparency Act of 2017,'' which is 
     scheduled to be considered by the full House this week.
       CalPERS is the largest public, defined benefit pension plan 
     in the United States, with approximately $346.13 billion in 
     global assets, as of market close December 13, 2017. CalPERS 
     manages investment assets on behalf of more than 1.8 million 
     public employees, retirees, and beneficiaries. As a global, 
     institutional investor that invests in more than 11,000 
     public companies worldwide, we rely on the integrity and 
     efficiency of our financial markets to furnish the long-term 
     sustainable, risk-adjusted returns that allow us to meet our 
     liabilities.
       Although we support the House Financial Services 
     Committee's focus on bipartisan ways to foster a system that 
     promotes capital formation and maximizes shareowner value, we 
     have several substantive concerns about H.R. 4015. Given the 
     large number of public companies in which CalPERS holds 
     voting shares, we use proxy advisory firms and other data 
     providers to assist us with analysis of management and 
     shareowner proposals and director elections. In providing 
     these services to CalPERS, these firms are guided by our 
     Governance and Sustainability Principles and proxy voting 
     policies to efficiently provide independent research and 
     analysis that helps to inform our voting decisions. While we 
     are certainly in favor of ensuring that proxy advisory firms 
     are well-regulated and transparent, we oppose efforts to 
     create an unduly burdensome regulatory regime in this area.
       H.R. 4015 would create such a regulatory regime by 
     establishing conflict of interest management requirements 
     that are duplicative of existing Securities and Exchange 
     Commission (SEC) authority. Currently, shareowners pay proxy 
     advisory firms through contractual arrangements, and this 
     provision of H.R. 4015 appears designed to fix a problem that 
     does not exist among contracting parties.
       In addition, the bill would establish a process by which 
     corporations have preliminary access to the proxy information 
     that investors pay for under contracts with proxy advisory 
     firms. At the same time, corporations that do not provide 
     early access to their consultants' positions on items subject 
     to shareowner votes would not be required to register with 
     the SEC. The bill would also significantly increase proxy 
     voting costs for investors and create additional barriers to 
     entry for new proxy advisory firms. Finally, the bill's 
     definition of ``proxy advisory firm'' makes it unclear 
     whether the intent is to regulate the thousands of entities 
     that provide advice to institutional investors or only the 
     three or so that would be considered proxy advisory firms 
     under this definition.
       Considering the SEC's limited resources and ever-increasing 
     responsibilities for addressing a broad range of emerging 
     challenges in our securities markets, it would be imprudent 
     to impose unnecessary requirements on the agency. As an 
     institutional investor that uses proxy advisory services, we 
     oppose H.R. 4015.
       Thank you for your consideration of these views. Please do 
     not hesitate to contact me if we can be of any assistance.
           Sincerely,
                                                     Marcie Frost,
     Chief Executive Officer.
                                  ____

                                        California State Teachers'


                                            Retirement System,

                           West Sacramento, CA, December 14, 2017.
     Hon. Maxine Waters,
     Washington, DC.
     Re H.R. 4015.

       To The Honorable Maxine Waters: CalSTRS was established 
     more than 100 years ago to provide retirement benefits for 
     California's public school teachers and is the largest 
     educator-only pension fund in the world. The CalSTRS 
     portfolio is currently valued at approximately $215 billion, 
     which we carefully invest, as patient capital with a long-
     term investment horizon, to meet the retirement needs of more 
     than 900,000 plan participants and their families.
       We are writing to express our opposition to H.R. 4015, 
     which would impose new regulatory burdens and restrictions on 
     proxy advisors. As a large institutional investor, we use 
     proxy advisors to help inform our proxy voting at portfolio 
     companies. Investors such as CalSTRS are the main clients of 
     the services of proxy advisory firms. Proxy advisory firms 
     provide useful research regarding the governance and finances 
     at these companies to supplement our own due diligence and 
     research, and they play an important and helpful role in 
     enabling cost-effective proxy voting with respect to the more 
     than 7,000 companies in our investment portfolio. We do not 
     outsource our proxy voting to these proxy advisors. Rather, 
     our Investment staff, in consultation with our governing 
     Teachers' Retirement Board, develops carefully thought-out 
     proxy voting guidelines, and then we vote our own proxies 
     based on those well-established guidelines.
       H.R. 4015 would establish a new federal regulatory scheme 
     for proxy advisory firms that would (1) grant companies the 
     right to review the proxy advisory firms' research reports 
     before the paying customer--investors--receive the reports; 
     (2) mandate that proxy advisory firms hire an ombudsman to 
     receive and resolve company complaints; and (3) if the 
     ombudsman is unable to resolve the complaints, and if the 
     company submits a written request, require proxy advisory 
     firms to publish the company management's dissenting 
     statement. While the stated goal of the proposed legislation 
     is the ``protection of investors'', we believe H.R. 4015 is 
     unnecessary, overly burdensome and counterproductive. 
     Furthermore, we believe the proposed requirements on the 
     industry could weaken the governance of public companies in 
     the U.S. and do not reflect the needs of proxy advisory firm 
     customers who are primarily institutional investors, such as 
     CalSTRS.
       While we understand some funds may utilize proxy advisory 
     firms to assist them in executing their proxy voting 
     responsibilities, the SEC has taken steps to make sure 
     investors are properly carrying out their due diligence 
     obligations. In fact as recently as 2014, the SEC 
     acknowledged the important role proxy advisors play in the 
     oversight of proxy voting of fund fiduciaries and, in 2014, 
     issued updated regulatory guidance on the responsibilities of 
     Investment Advisers who utilize proxy advisory firms in their 
     proxy voting. In addition, the SEC has authority under 
     current law to address any conflicts at these proxy advisory 
     firms and has taken steps to require additional disclosure of 
     these conflicts by proxy advisors. Accordingly, we believe 
     that the existing SEC regulatory regime already protects our 
     interests with respect to proxy advisory firms and that H.R. 
     4015 is both unnecessary and counter-productive.
       The proposed legislation would result in higher costs for 
     pension plans, like CalSTRS, and other institutional 
     investors. H.R. 4015 would give companies the right to review 
     reports and lobby the advisory firms prior to the reports 
     being distributed to their customers and require firms to 
     establish an ombudsman to address issues raised by the 
     companies. Given the already short time period between when 
     companies issue their proxy materials and the shareholder 
     meeting date, the review and lobby process would severely 
     limit CalSTRS ability to review and vote proxies in a timely 
     manner. This multi-layered review would substantially raise 
     costs in order to meet deadlines and maintain the current 
     level of scrutiny and due diligence over proxy voting. 
     Moreover, the proposed legislation is likely to limit 
     competition by reducing the current number of proxy advisors 
     and imposing additional barriers to entry for potential new 
     firms--again raising costs for investors.
       Thank you for considering our views on this very important 
     matter. We would be happy to discuss our perspectives with 
     you or your staff at your convenience. Should you have any 
     immediate questions or wish to discuss our concerns, please 
     contact Aeisha Mastagni, Portfolio Manager.
           Sincerely,
                                                     Anne Sheehan,
                                 Director of Corporate Governance.

[[Page 20428]]

     
                                  ____
                                             Ohio Public Employees


                                            Retirement System,

                                Columbus, Ohio, December 15, 2017.
       Dear Representative: We are writing on behalf of the Ohio 
     Public Employees Retirement System (OPERS) to oppose H.R. 
     4015, the Corporate Governance Reform and Transparency Act of 
     2017 (Act), a bill that could significantly and negatively 
     impact OPERS' ability to effectively and efficiently vote its 
     proxies and fulfill its fiduciary obligations.
       OPERS is the 12th largest public retirement system in the 
     country, with more than one million active, inactive, and 
     retired members, which means that almost one out of every 12 
     Ohioans has some connection to our System. In order to 
     provide secure retirement benefits for our members, OPERS has 
     invested more than $78 billion in capital markets around the 
     world, including holdings in more than 10,000 public 
     companies. As a fiduciary, OPERS is required to act in the 
     best interests of its members, and this responsibility 
     extends to the prudent management of the investments we make 
     with our members' retirement contributions. We believe it is 
     our duty to engage with, participate in, and exercise our 
     voting rights for each of public companies in which we are 
     invested in an effort to ensure that those companies continue 
     to generate value for their shareholders.
       However, with limited time and resources, it is difficult 
     for an investor, even one as sophisticated as OPERS, to fully 
     research every proxy and follow every issue. That is why we 
     have engaged the services of proxy advisory firms--they 
     perform the research and analyses that we cannot, and provide 
     us with impartial voting recommendations that we consider 
     against our own proxy voting guidelines. Without timely 
     access to the reports provided by our proxy advisory firms, 
     it would be significantly more difficult to meet our 
     obligations to our members.
       We are aware of the criticisms that have been leveled at 
     proxy advisory firms, namely that they wield undue influence 
     over the proxy voting decisions of their clients, but OPERS 
     has taken steps to ensure that this is not the case. Our 
     Board of Trustees has adopted proxy voting guidelines to 
     govern our voting decisions as shareholders. To the extent 
     that a proxy advisory firm report or recommendation conflicts 
     with our proxy voting guidelines, OPERS Corporate Governance 
     staff will closely scrutinize the discrepancies and the 
     firm's recommendations can be disregarded.
       Given the sheer necessity of proxy advisory firms and the 
     services they provide, it is troubling that the House of 
     Representatives is considering changes that would erode 
     investor confidence in the impartiality and independence of 
     proxy advisory firm reports. If enacted, the Act would make 
     it harder--perhaps impossible--for OPERS to effectively vote 
     each of the thousands of proxies it receives during any given 
     proxy season. In our view, this constitutes a violation of 
     our duty to our members and the people of Ohio, and is 
     therefore unacceptable
       We urge you to oppose the Corporate Governance and 
     Transparency Act of 2017.
       Thank you for your continued support of Ohio's public 
     retirement systems. If you have questions regarding OPERS' 
     comments or proxy voting guidelines, please do not hesitate 
     to contact OPERS' Corporate Governance Officer, Patti 
     Brammer.
           Sincerely,
                                                   Karen Carraher,
                                               Executive Director.
                                                    Patti Brammer,
     Corporate Governance Officer.
                                  ____

         National Conference on Public Employee Retirement 
           Systems,
                                Washington, DC, December 11, 2017.
     Hon. Paul Ryan,
     Speaker of the House of Representatives,
     House of Representatives, Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader,
     House of Representatives, Washington, DC.
       Dear Speaker Ryan and Leader Pelosi: On behalf of the 
     National Conference on Public Employee Retirement Systems 
     (NCPERS), I am writing to relay our serious concerns with, 
     and opposition to, H.R. 4015, the ``Corporate Governance 
     Reform and Transparency Act of 2017,'' which was reported out 
     of the House Financial Services Committee on November 15.
       The legislation is riddled with worrisome provisions, 
     premised on false assumptions, that undercut the ability of 
     pension plans to receive independent, unbiased corporate 
     governance research, introducing new costs and burdens to 
     pension plans and undermining their ability to effectively 
     exercise their fiduciary responsibilities. We are alarmed by 
     the precedent this legislation would set.
       NCPERS is the largest national, nonprofit public pension 
     advocate, representing more than 500 funds that manage more 
     than $3 trillion in pension assets. We strive to protect the 
     autonomy and independence of state and local government 
     retirement systems. H.R. 4015 would undermine this very 
     principle.
       Many pension plan administrators employ proxy advisory 
     firms to provide them with unbiased and independent data and 
     analytical research to help them formulate their corporate 
     governance and proxy voting policies. In addition, in some 
     instances our members ask the proxy advisory firms to 
     implement their proxy voting instructions on their behalf 
     following a plan's guidelines. The use of proxy research 
     reports prepared by proxy advisory firms is one important way 
     that our members exercise their due diligence to make 
     independent, well-informed decisions. H.R. 4015 would (1) 
     grant corporations the ``right to review'' these reports 
     before the pension plan receives the report; (2) mandate that 
     proxy advisory firms hire an ombudsman--a cost that pension 
     funds would ultimately pay--to receive and resolve 
     corporations' complaints; and (3) if the ombudsman is unable 
     to resolve the complaints, and if the corporation submits a 
     written request, proxy advisory firms would be required to 
     publish the corporation's dissenting statement. This would 
     effectively allow corporations the privilege to make the 
     ``final cut'' on a report that is requested and paid for by 
     the pension plan. Such corporate interference in the affairs 
     of its shareholders is unprecedented and would dilute the 
     independence of the proxy firms' reports and ultimately the 
     independence of pension plans.
       Additionally, the regulatory regime proposed under H.R. 
     4015 is part-inappropriate and part-unnecessary, and would 
     needlessly drive up costs for public pension plans while 
     reducing market choice. While NCPERS welcomes the opportunity 
     to protect public pensions, we are puzzled by the need to 
     impose a new federal regulatory regime that is largely 
     duplicative of existing SEC requirements that are designed to 
     protect investors, including those for registered investment 
     advisers under the Investment Advisers Act of 1940. Other 
     provisions of H.R. 4015 propose to bypass free-market 
     principles by authorizing the SEC to pre-qualify industry 
     entrants based on a set of vague and highly subjective 
     standards. We believe that contrary to the sponsors' stated 
     intent, namely to increase competition and protect investors, 
     the heavy-handed regime would result in fewer market 
     participants, would enhance barriers to new entrants and 
     could potentially lead smaller proxy advisory firms to exit 
     the industry altogether, reducing market choice for our 
     members. In the end, H.R.4015 would increase costs, perhaps 
     significantly increase costs, to pension plans administrators 
     and beneficiaries while providing no additional benefits.
       Public pensions play an important role in the local, state 
     and national economies. We ask that you consider the 
     detrimental impact that H.R. 4015 would have on the 
     independence and financial wellbeing of public pension plans, 
     and urge you to oppose this and any similar legislation.
       NCPERS greatly appreciates your time and consideration. If 
     there is any additional information I can provide that would 
     assist you, please do not hesitate to contact me.
           Sincerely,
                                                   Hank Kim, Esq.,
                                     Executive Director & Counsel.

  Ms. MAXINE WATERS of California. Mr. Speaker, they are frightened, 
absolutely frightened, that we could possibly be on the floor today 
negotiating with the opposite side of the aisle about investment 
advisers.
  They can't understand why it is that we have Members of Congress who 
do not understand how important it is to have someone protecting the 
interest of middle class workers all over America.
  You have heard the reference to the teachers, firefighters, garbage 
collectors, and on and on and on. These people work every day. They 
invest in their retirement and they expect their retirement to be taken 
care of, honored, and not to be basically undermined by corporate 
interests. So these investment advisers are extremely important to the 
investors of these retirement systems.
  Having said that, Mr. Speaker, H.R. 4015 is simply the latest effort 
by Republicans to check off every item on the corporate wish list 
before the holidays. The bill would empower corporate management at the 
expense of institutional shareholders, like our Nation's public pension 
plans, by allowing corporations to unfairly influence proxy voting 
recommendations.
  Because of the size of their portfolios, public pension plans who may 
hold shares in thousands of companies must rely on proxy advisers to 
provide independent research and voting recommendations on the merits 
of proposals. Without the work of proxy advisers, institutional 
investors would, in practical terms, be left voiceless on corporate 
matters that are important to them, including governance, board 
compensation, executive pay, and environmental sustainability.
  H.R. 4015 would give corporate management the unprecedented right to 
interfere in the relationship between institutional investors and the 
proxy advisers they hire.
  At its core, the bill is based on the false premise that shareholders 
blindly

[[Page 20429]]

follow the recommendations of proxy advisers who themselves are 
beholden to activist interests. This belief is directly contradicted by 
reality.
  For example, in 2017, the largest proxy advisory firm recommended 
``no'' votes on less than 12 percent of say-on-pay proposals, which are 
nonbinding votes on executive compensation practices required under the 
Dodd-Frank Act. That means they sided with company management 88 
percent of the time.
  When it comes to director elections, the largest proxy firm voted 
``yes''--``yes'' votes for 90 out of 100 directors. Proxy advisers 
understand that the vast majority of companies' proposals are good for 
shareholders, but not for all.
  Mr. Speaker, I ask for a ``no'' vote on this misdirected bill, and I 
yield back the balance of my time.
  Mr. HENSARLING. Mr. Speaker, may I inquire how much time I have 
remaining?
  The SPEAKER pro tempore. The gentleman from Texas has 2 minutes 
remaining.
  Mr. HENSARLING. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, while I was fascinated to hear so many of my friends on 
the other side of the aisle exclaim how much they care about working 
Americans, it just makes we wonder why now twice--twice--in the last 24 
hours they have voted against giving the average working American a 
$2,059 tax cut. Twice now they have voted to deny working Americans tax 
relief in order to bolster their paychecks. I wonder about that.
  I also wonder, as I listened to this litany of groups whose letters 
were entered into the Record, how often I heard labor union; government 
pension; Washington, D.C.; and special interest group.
  What I didn't hear about is average working Americans who have their 
investment in trying to save to buy a home, trying to perhaps fund a 
small business, or send a kid to college. It is their interest that we 
are trying to stand up for.
  So what we know is that the SEC--the Securities and Exchange 
Commission--have, for all intents and purposes, required investment 
advisers to use one of two proxy advisory firms, one of which, as my 
colleague, the author of the bill pointed out, is owned by a foreign 
labor union. Yet the SEC requires us to use them.
  So here is the radical nature of the bill: the bill, H.R. 4015, 
simply says that we ought to have transparency--something apparently my 
friends across the other side of the aisle are against.
  We say they have to register with the SEC--something my friends on 
the other side of the aisle are against.
  They have to disclose potential conflicts of interest. Apparently my 
friends on the other side are against that.
  They have to disclose codes of ethics. Apparently my friends on the 
other side of the aisle are against that, as well as making their 
methodologies public.
  This is a disclosure bill to help investors, pure and simple. We 
ought to vote in favor of H.R. 4015.
  Mr. Speaker, I yield back the balance of my time.
  Ms. MAXINE WATERS of California. Mr. Speaker, I include in the Record 
the following letters:

                               Americans for Financial Reform,

                                Washington, DC, December 18, 2017.
       Dear Representative: On behalf of Americans for Financial 
     Reform (AFR), we are writing to urge you to vote against H.R. 
     4015, the ``Corporate Governance Reform and Transparency Act 
     of 2017'', which will be considered on the House floor this 
     week. By placing an excessive and unnecessary regulatory 
     burden on proxy advisory firms, this bill would unfairly 
     disadvantage shareholders as compared to firm management, and 
     raise serious First Amendment concerns as well. AFR joins 
     major representatives of shareholders such as the Council of 
     Institutional Investors (CII) and the California Public 
     Employee Retirement System (CALPERS) in opposing this bill.
       H.R. 4015 would establish a new Federal regulatory scheme 
     for proxy advisory firms. These firms provide institutional 
     investors, including pension funds, with the research and 
     information they need in order to exercise their voting 
     rights as shareholders. The regulations proposed in H.R. 4015 
     would require proxy advisory firms to provide the management 
     of public companies with detailed voting recommendations 
     relevant to their firms before these recommendations were 
     shown to shareholders who paid for proxy advisory services. 
     Advisory firms would also be required to resolve any 
     complaints from firm management, and employ an ombudsman to 
     ensure that such complaints were addressed. If complaints 
     were not resolved to the satisfaction of firm management, 
     then the full text of complaints from companies would be 
     included next to voting recommendations in proxy advisory 
     reports. Regulations would also mandate extensive disclosure 
     requirements for the details of proxy advisory methodologies, 
     reducing incentives to invest in developing such 
     methodologies. The costs of this regulatory regime would be 
     passed on to investors and pension funds that use proxy 
     advisory services.
       The regulatory scheme is a transparent attempt to weaken if 
     not eliminate the independence of proxy advisory firms from 
     firm management by placing sharp restrictions on their 
     expression of opinions which differ from those of firm 
     management. Besides raising First Amendment issues, this 
     improperly restricts the ability of shareholders to obtain 
     independent views on how they should exercise their voting 
     rights.
       This legislation cannot be justified, as some have 
     attempted to do, by any analogy to the regulation of credit 
     rating agencies. Proxy advisory services do not face a 
     fundamental conflict of interest in their business model 
     because they are not paid by securities issuers while 
     providing certification of securities quality to securities 
     investors. They also have not been implicated in massive 
     fraudulent behavior that contributed directly to a global 
     financial crisis. Further, proxy advisory services are 
     clearly recognized as providing opinions regarding voting 
     decisions, in a context where many other such opinions are 
     available, rather than being entities that certify the 
     quality of securities.
       Any concerns about the independence of proxy advisory 
     services can be addressed by simply requiring such services 
     to register as investment advisors under the Investment 
     Advisors Act. The radical regulatory scheme laid out in H.R. 
     4015 goes far beyond anything even mentioned in the recent 
     Treasury Department report on capital markets, which examined 
     the issue of proxy advisory firms and recommended only that 
     regulators engage in ``further study and evaluation of proxy 
     advisory firms, including regulatory responses to promote 
     free market principles if appropriate.'' The regulatory 
     scheme in H.R. 4015, besides being misguided in other ways, 
     certainly does not promote free market principles.
       The effort in H.R. 4015 to eliminate the independent voice 
     of proxy advisory services should be rejected. We urge you to 
     vote against it.
       For more information please contact AFR's Policy Director, 
     Marcus Stanley.
           Sincerely,
     Americans for Financial Reform.
                                  ____

                                          Council of Institutional


                                                    Investors,

                                 Washington, DC, November 9, 2017.
     Re Proposed Legislation Relating to Proxy Advisory Firms.

     Hon. Jeb Hensarling,
     Chairman, Committee on Financial Services, House of 
         Representatives, Washington, DC.
     Hon. Maxine Waters,
     Ranking Member, Committee on Financial Services, House of 
         Representatives, Washington, DC.
       Dear Mr. Chairman and Ranking Member Waters: On behalf of 
     the Council of Institutional Investors (CII or the Council) 
     and the undersigned 45 investors and investor organizations, 
     we are writing to express our opposition to legislation that 
     has recently been introduced and is pending in the Committee 
     on Financial Services related to proxy advisory firms.
       CII is a nonpartisan, nonprofit association of public, 
     corporate and union employee benefit funds, other employee 
     benefit plans, state and local entities charged with 
     investing public assets, and foundations and endowments with 
     combined assets under management exceeding $3 trillion. CII's 
     member funds include major long-term shareowners with a duty 
     to protect the retirement savings of millions of workers and 
     their families.
       H.R. 4015, the ``Corporate Governance Reform and 
     Transparency Act of 2017,'' and similar language which was 
     incorporated in Subtitle Q of Title IV of H.R. 10, ``the 
     Financial CHOICE Act,'' would require, as a matter of federal 
     law, that proxy advisory firms share their research reports 
     and proxy voting recommendations with the companies about 
     whom they are writing before they are shared with the 
     institutional investors who are their clients. In essence, 
     while the stated goal of the proposed legislation is the 
     ``protection of investors,'' as the primary customer of proxy 
     advisory firm research, institutional investors believe that 
     adding the new proposed requirements to the industry is 
     unnecessary, overly burdensome and counter-productive.
       The proposed legislation appears to be based on several 
     false premises, including

[[Page 20430]]

     the erroneous conclusion that proxy advisory firms dictate 
     proxy voting results and that institutional investors do not 
     drive or form their own voting decisions. Indeed, many 
     pension funds and other institutional investors contract with 
     proxy advisory firms to review their research, but most large 
     holders have adopted their own policies and employ the proxy 
     advisory firms to help administer the voting of proxies 
     during challenging proxy seasons.
       In short, most large institutional investors vote their 
     proxies according to their own guidelines. While large 
     institutional investors rely on proxy advisors to manage the 
     analysis of issues presented in the proxy statements 
     accompanying over 38,000 meetings annually, and to help 
     administer proxy voting, this does not mean that they 
     abdicate their responsibility for their own voting decisions.
       The independence that shareowners exercise when voting 
     their proxies is evident in the statistics related to ``say 
     on pay'' proposals and director elections. Although 
     Institutional Shareholder Services Inc. (ISS), the largest 
     proxy advisory firm, recommended against say on pay proposals 
     at 11.92 percent of Russell 3000 companies in 2017, only 1.28 
     percent of those proposals received less than majority 
     support from shareowners. Similarly, although ISS recommended 
     votes in opposition to the election of 10.43 percent of 
     director-nominees during the most recent proxy season, just 
     0.185 percent failed to obtain majority support.
       We believe the pending legislation (both Subtitle Q of 
     Title IV of H.R. 10 and H.R. 4015, which was introduced last 
     month) would weaken corporate governance in the United 
     States; undercut proxy advisory firms' ability to uphold 
     their fiduciary obligation to their investor clients; and 
     reorient any surviving firms to serve companies rather than 
     investors. The system of corporate governance that has 
     evolved in the United States relies on the accountability of 
     boards of directors to shareowners, and proxy voting is a 
     critical means by which shareowners hold boards to account. 
     Currently, proxy advisors provide equity holders of U.S. 
     corporations with independent advice. The proposed bills 
     threaten to abrogate that very independence, which is a 
     hallmark of ownership and accountability.
       Proxy advisory firms, while imperfect, play an important 
     and useful role in enabling effective and cost-efficient 
     independent research, analysis and informed proxy voting 
     advice for large institutional shareholders, particularly 
     since many funds hold thousands of companies in their 
     investment portfolio. In our view, the proposed legislation 
     would undermine proxy advisory firms' ability to provide a 
     valuable service to pension funds and other institutional 
     investors.
       We are particularly concerned that, if enacted, H.R. 10 and 
     H.R. 4015 would:
       Require that proxy advisory firms: 1) provide companies 
     early review of their recommendations and most elements of 
     the research informing their reports; 2) give companies an 
     opportunity to review and lobby the firms to change their 
     independent recommendations; 3) mandate a heavy-handed 
     ``ombudsman'' construct to address issues that companies 
     raise.
       Under H.R. 10, the company could essentially veto the proxy 
     advisor's report and prevent its publication, while H.R. 4015 
     would require proxy advisors to publish a company's statement 
     ``detailing its complaints'' in the proxy advisory firms' 
     final reports to their clients, if the ombudsman is unable to 
     resolve these complaints and if the companies make the 
     request in writing.
       Giving corporate issuers the ``right to review'' the proxy 
     advisors' work product BEFORE the reports go to the paying 
     customers would not only give corporate management 
     substantial undue influence over proxy advisory firms' 
     reports, but could compromise the very fiduciary duties that 
     large institutional investors have to their own clients, 
     beneficiaries and shareowners. We believe the objective of 
     the bills is to bias proxy advisory firm recommendations in 
     favor of corporate management, creating a dynamic that would 
     encourage the firms to view management as their clients, 
     rather than the investors who contract for this research. 
     This approach would award a privileged position to high-
     powered CEOs and other executives to talk proxy advisory 
     firms out of criticizing management on subjects such as CEO 
     pay, without providing the same pre-publication right to 
     others. Another concern is that such forced pre-publication 
     review may not be consistent with First Amendment rights to 
     freedom of speech. Regardless, the attempt by government fiat 
     to interpose corporate management between investors and those 
     investors hire to provide them with independent research is 
     highly questionable as a matter of public policy.
       Further, the additional regulatory hurdles imposed would 
     surely: increase the complexity of the challenges faced by 
     the proxy advisory firms; impose even more severe time 
     constraints on the production of reports; and, without doubt, 
     add significant resource burdens that would increase the cost 
     of their services. In short, H.R. 4015 would add no value but 
     would add an unnecessary drag to institutional investors' 
     portfolios. This is not constructive regulatory ``reform,'' 
     and is not supported by institutional investors.
       Under both bills, pension funds and other institutional 
     investors would have less time to analyze the advisor's 
     reports and recommendations in the context of their own 
     adopted proxy voting guidelines to arrive at informed voting 
     decisions. Time is already tight, particularly in the highly 
     concentrated spring ``proxy season,'' due to the limited 
     period between a company's publication of the annual meeting 
     proxy materials and annual meeting dates.
       Moreover, the proposed legislation does not appear to 
     contemplate a parallel requirement that dissidents in a proxy 
     fight or proponents of shareowner proposals also receive the 
     recommendations and research in advance. This would violate 
     an underlying tenet of U.S. corporate governance that where 
     matters are contested in corporate elections, management and 
     shareowner advocates should operate on a level playing field.
       Require the Securities and Exchange Commission (SEC) to 
     assess the ability of proxy advisory firms to perform their 
     duties and to assess the adequacy of proxy advisory firms' 
     ``financial and managerial resources.''
       The entities that are in the best position to make 
     assessments about the ability of proxy advisory firms to 
     perform their contractual duties are the pension funds and 
     other institutional investors that choose to purchase and use 
     the proxy advisory firms' reports and recommendations. These 
     are sophisticated consumers who make choices based on free-
     market principles.
       In 2014, the SEC staff issued guidance reaffirming that 
     investment advisors have a duty to maintain sufficient 
     oversight of proxy advisory firms and other third-party 
     voting agents: We publicly supported that guidance. We are 
     unaware of any compelling empirical evidence indicating that 
     the guidance is not being followed or that the burdensome 
     federal regulatory scheme contemplated by the proposed 
     legislation is needed.
       Increase costs for institutional investors with no clear 
     benefits.
       If enacted, the proposed legislation is likely to result in 
     higher costs for pension plans and other institutional 
     investors--potentially much higher costs if investors seek to 
     maintain current levels of scrutiny and due diligence around 
     proxy voting amid the exit of some or all proxy advisory 
     firms from the business. The proposed legislation is highly 
     likely to limit competition, by reducing the current number 
     of proxy advisory firms in the U.S. market and imposing 
     serious barriers to entry for potential new firms.
       We believe that the cost estimate provided by the 
     Congressional Budget Office to the House Financial Services 
     Committee in September 2016 on substantially similar 
     legislation in the 114th Congress (that is, that private 
     sector costs would be less than $154 million) underestimates 
     the costs that this bill would impose through private-sector 
     mandates. The CBO should analyze the probable effects of the 
     proposal on competition, and the costs to investors if (a) 
     competition is reduced and the pricing power of a surviving 
     proxy advisory firm is enhanced, and (b) if all present firms 
     exit the market and the services they provided are no longer 
     available, forcing individual investors to use internal 
     resources not subject to the new regulatory mandate.
       Finally, we note that in recent months the United States 
     Department of Treasury (Treasury) performed outreach to 
     identify views on proxy advisory firms in connection with its 
     recently issued report to the President on ``A Financial 
     System that Creates Economic Opportunities, Capital 
     Markets.'' In that report, the Treasury found that 
     ``institutional investors, who pay for proxy advice and are 
     responsible for voting decisions, find the services valuable, 
     especially in sorting through the lengthy and significant 
     disclosures contained in proxy statements.'' More 
     importantly, the Treasury did not recommend any legislative 
     changes governing the proxy advisory firm industry.
       Thank you for considering these views. CH would be very 
     happy to discuss its perspective in more detail.
           Sincerely,
       Jeff Mahoney, General Counsel, Council of Institutional 
     Investors; Marcie Frost, Chief Executive Officer, CalPERS; 
     Anne Sheehan, Director of Corporate Governance, California 
     State Teachers' Retirement System; Gregory W. Smith, 
     Executive Director/CEO, Colorado Public Employees' Retirement 
     Association; Denise I. Nappier, Connecticut State Treasurer, 
     Trustee, Connecticut Retirement Plans and Trust Funds; 
     Michael McCauley, Senior Officer, Investment Programs & 
     Governance, Florida State Board of Administration; Michael 
     Frerichs, Illinois State Treasurer; Jonathan Grabel, Chief 
     Investment Officer, Los Angeles County Employees Retirement 
     Association; Scott Stringer, New York City Comptroller; Karen 
     Carraher, Executive Director, Ohio Public Employees 
     Retirement System; Richard Stensrud, Executive Director, 
     School Employees Retirement System of Ohio; Jeffrey S. Davis, 
     Executive Director, Seattle City Employees' Retirement 
     System.
       Tobias Read, Treasurer, State of Oregon; Michael J. Nehf, 
     Executive Director, STRS

[[Page 20431]]

     Ohio; Theresa Whitmarsh, Executive Director, Washington State 
     Investment Board; Heather Slavin Corzo, Director, Office of 
     Investment, AFL-CIO; Dieter Waizenegger, Executive Director, 
     CtW Investment Group; Timothy J. Driscoll, Secretary-
     Treasurer, International Union of Bricklayers & Allied 
     Craftworkers; Janice J. Fueser, Research Coordinator, 
     Corporate Governance, UNITE HERE; Euan Stirling, Global Head 
     of Stewardship & ESG Investing, Aberdeen Standard 
     Investments; Blaine Townsend, Senior Vice President, 
     Director, Sustainable, Responsible and Impact Investing Group 
     Bailard, Inc.; Jennifer Coulson, Senior Manager, ESG 
     Integration, British Columbia Investment Management 
     Corporation (bcIMC); Julie Cays, Chair, Canadian Coalition 
     for Good Governance; Mike Lubrano, Managing Director, 
     Corporate Governance and Sustainability, Cartica Management, 
     LLC.
       Carole Nugent, CCRIM Coordinator, Conference for Corporate 
     Responsibility, Indiana and Michigan; Karen Watson, CFA, 
     Chief Investment Officer, Congregation of St. Joseph; Sister 
     Teresa Teresa George, D.C., Provincial Treasurer, Daughters 
     of Charity, Province of St. Louise; Mary Ellen Leciejewski, 
     OP, Vice President, Corporate Responsibility, Dignity Health; 
     Jeffery W. Perkins, Executive Director, Friends Fiduciary 
     Corporation; Matthew S. Aquiline, CEO, International Council 
     of Employers of Bricklayers & Allied Craftworkers; Andrew 
     Shapiro, Managing Member & President, Lawndale Capital 
     Management, LLC; Clare Payn, Head of Corporate Governance 
     North America, Legal & General Investment Management; Susan 
     S. Makos, Vice President of Social Responsibility, Mercy 
     Investment Services, Inc.; Luan Jenifer, Chief Operating 
     Officer, Miller/Howard Investments, Inc.; Michelle de 
     Cordova, Director, Corporate Engagement Public Policy, NEI 
     Investments; Judy Byron, OP, Director, Northwest Coalition 
     for Responsible Investment.
       Amy O'Brien, Global Head of Responsible Investing, Nuveen, 
     the investment manager of TIAA; Julie Fox Gorte, Ph.D, Senior 
     Vice President for sustainable Investing, Pax World 
     Management, LLC; Kathleen Woods, Corporate Responsibility 
     Chair, Portfolio Advisory Board, Adrian Dominican Sisters; 
     Judy Cotte, VP & Head, Corporate Governance & Responsible 
     Investment, RBC Global Asset Management; Maria Egan, 
     Portfolio Manager and Shareholder Engagement Manager, 
     Reynders, McVeigh Capital Management, LLC; Maureen O'Brien, 
     Vice President and Corporate Governance Director, Segan Marco 
     Advisers; Kevin Thomas, Director of Shareholder Engagement, 
     Shareholder Association for Research & Education; Jonas D. 
     Kron, Senior Vice President, Director of Shareholder 
     Advocacy, Trillium Asset Management, LLC; Tim Smith, Director 
     of ESG, Shareowner Engagement, Walden Asset Management; Sonia 
     Kowal, President, Zevin Asset Management, LLC.
                                  ____



                           Council of Institutional Investors,

                                Washington, DC, December 12, 2017.
     Re H.R. 4015.

     Hon. Paul Ryan,
     Speaker of the House of Representatives,
     House of Representatives, Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives,
     Washington, DC.
       Dear Mr. Speaker and Minority Leader Pelosi: On behalf of 
     the Council of Institutional Investors (CII or Council), we 
     are writing to express our opposition to H.R. 4015, which we 
     understand will soon be voted on by the United States House 
     of Representatives.
       CII is a nonpartisan, nonprofit association of public, 
     corporate and union employee benefit funds, other employee 
     benefit plans, state and local entities charged with 
     investing public assets, and foundations and endowments with 
     combined assets under management exceeding $3 trillion. CII's 
     member funds include major long-term shareowners with a duty 
     to protect the retirement savings of millions of workers and 
     their families. The Council's associate members include a 
     range of asset managers with more than $20 trillion in assets 
     under management.
       Many of our members and other institutional investors 
     voluntary contract with proxy advisory firms to obtain 
     research reports to assist the funds in voting their proxies 
     according to the funds' own proxy voting guidelines. This 
     contractual relationship provides investors a cost-efficient 
     means of obtaining supplemental research on proxy voting 
     issues, which is particularly beneficial since many funds 
     hold thousands of companies in their investment portfolios.
       H.R. 4015 would establish a new federal regulatory scheme 
     for proxy advisory firms that would (I) grant ``companies,'' 
     apparently meaning corporate management, the right to review 
     the proxy advisory firms research reports before the paying 
     customers--investors--receive the reports; (2) mandate that 
     the proxy advisory firms hire an ombudsman to receive and 
     resolve corporation's complaints; and (3) if the ombudsman to 
     unable to resolve the complaints, and if the company 
     management submits a written request, proxy advisory firms 
     would be required to publish company management's dissenting 
     statement. These provisions would result in the federal 
     government interposing corporate management between investors 
     and those proxy advisory firms that investors hire to provide 
     them with research on issues, such as executive compensation, 
     in which corporate management can have its own interests, 
     sometimes in conflict with investors and with the corporate 
     entity.
       Setting aside whether the provisions of H.R. 4015 are 
     consistent with First Amendment rights of freedom of speech, 
     the provisions are not practical. The provisions would 
     require proxy advisory firms to provide the management teams 
     of more than 4,000 corporations the opportunity to present 
     detailed comments on the firm's reports in a matter of weeks 
     before the reports are provided to investors. Thus, investors 
     would have limited time to analyze the reports in the context 
     of their own proxy voting guidelines to arrive at informed 
     voting decisions. Time is already tight, particularly in the 
     spring ``proxy season,'' due to the limited period between a 
     corporations' publication of the annual meeting proxy 
     materials and the date in which investors are permitted to 
     vote on proxy issues.
       In addition, the provisions of H.R. 4015 would likely 
     result in fewer market participants in the proxy advisory 
     firm industry. The provisions would add significant costs 
     increasing barriers to new entrants and potentially leading 
     some existing firms to exit the industry altogether.
       We also note that the United States Department of Treasury 
     recently performed extensive outreach to identify views of 
     company management teams and other market participants on 
     proxy advisory firms in connection with its recently issued 
     report to President Trump on ``A Financial System that 
     Creates Economic Opportunities, Capital Markets.'' In its 
     report the Treasury found that ``institutional investors, who 
     pay for proxy advice and are responsible for voting 
     decisions, find the [proxy advisory firm] services valuable, 
     especially in sorting through the lengthy and significant 
     disclosures contained in proxy statements.'' More 
     significantly, the Treasury did not call for legislation of 
     the proxy advisory firm industry.
       Finally, we have attached for your information and review a 
     November 9, 2017 letter signed by 45 investors and investor 
     organizations describing in more detail the basis for their 
     strong opposition to H.R. 4015.
       Thank you for considering our views. We would welcome the 
     opportunity to discuss our perspective on this important 
     issue with you or your staff in more detail.
           Sincerely,
                                               Jeffrey P. Mahoney,
                                                  General Counsel.

                              {time}  1415

  The SPEAKER pro tempore. All time for debate has expired.
  Pursuant to House Resolution 657, the previous question is ordered on 
the bill, as amended.
  The question is on the engrossment and third reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.


                           Motion to Recommit

  Mr. SARBANES. Mr. Speaker, I have a motion to recommit at the desk.
  The SPEAKER pro tempore. Is the gentleman opposed to the bill?
  Mr. SARBANES. I am opposed.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

       Mr. Sarbanes moves to recommit the bill, H.R. 4015, with 
     instructions to report the same back to the House forthwith, 
     with the following amendments:
       Page 14, strike line 23.
       Page 14, line 25, strike the period and insert ``; and'' 
     and after such line insert the following:
       ``(C) does not include proxy voting recommendations on 
     shareholder proposals related to political campaign 
     contributions of a company.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Maryland is recognized for 5 minutes in support of his motion.
  Mr. SARBANES. Mr. Speaker, this is the final amendment to the bill, 
which will not kill the bill or send it back to committee. If adopted, 
the bill will immediately proceed to final passage, as amended.
  Mr. Speaker, this amendment is about promoting greater transparency 
and shareholder review of political campaign activity of public 
corporations.
  As we have heard, the underlying bill would create new restrictions 
on proxy advisory firms that would erode their capacity to provide 
reliable, independent advice to public company investors: institutional 
investors such as pension funds that serve firefighters,

[[Page 20432]]

teachers, and police officers. My amendment would restore the ability 
of advisory firms to provide research and vote recommendations 
regarding a public company's spending on political campaign 
contributions.
  Over the past half a century, public companies have increasingly 
entered the political arena, spending huge sums on political 
contributions and campaign activity. Court rulings like Citizens United 
and SpeechNOW.org have opened new avenues of influence for corporate 
America and have worked to amplify the role of public companies in our 
politics. Mr. Speaker, the public is becoming increasingly anxious 
about this.
  Fortunately, in recent years, some shareholders and public interest 
organizations have successfully put pressure on public corporations to 
adopt shareholder review of corporate political activity, stemming the 
tide of unchecked political spending from public corporations. Yet the 
underlying bill would unwind that progress, giving corporations direct 
influence over proxy advisory firm recommendations to shareholders 
regarding political activity, knocking down yet another pillar of 
political accountability in our politics.
  Mr. Speaker, we need more, not less political accountability from our 
Nation's corporations. As this week has shown, corporate America has an 
outsized influence in our Nation's public policy. Look no further than 
today's vote on the GOP tax scam or yesterday's further deregulation of 
some of our Nation's largest financial institutions.
  There is no mystery as to why this has happened. A sophisticated 
corporate influence economy involving campaign contributions, 
aggressive lobbying, a web of trade associations, corporate-backed 
think tanks, and outside political organizations has sprung up in 
Washington to shape who runs for office, who wins office, and the 
policies we in Congress adopt.
  Mr. Speaker, Americans hate this system. They hate the arrogance with 
which monied interests exert their influence on our politics and our 
government. They feel that their voice, the voice of the people, is 
ignored while Big Money insiders have their way on Capitol Hill. They 
want us to change the corrosive status quo.
  Mr. Speaker, we can take a small step forward with this amendment to 
restore the American people's faith in our ability to stand up to 
corporate power. We should adopt this modest, but important change to 
an otherwise flawed piece of legislation.
  At a minimum, we should protect the opportunity for institutional 
investors to receive independent research and advice when it comes to 
the political activity of public companies. It is about transparency. 
It is about accountability. It is about the public interest.
  Mr. Speaker, to that end, I urge my colleagues to support the motion 
to recommit, and I yield back the balance of my time.
  Mr. HENSARLING. Mr. Speaker, I claim the time in opposition.
  The SPEAKER pro tempore. The gentleman from Texas is recognized for 5 
minutes.
  Mr. HENSARLING. Mr. Speaker, I listened carefully. I didn't hear 
anything about labor union political campaign contributions, known 
political allies of the Democratic Party.
  This is yet one more assault on the First Amendment's freedom of 
speech by my friends on the other side of the aisle. Mr. Speaker, it 
ought to be rejected, and I yield back the balance of my time.
  The SPEAKER pro tempore. Without objection, the previous question is 
ordered on the motion to recommit.
  There was no objection.
  The SPEAKER pro tempore. The question is on the motion to recommit.
  The question was taken; and the Speaker pro tempore announced that 
the noes appeared to have it.
  Mr. SARBANES. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further 
proceedings on this question will be postponed.

                          ____________________