We are discussing the Roundtable recently held by the SEC on proxy advisory firms.
A great deal of the discussion in the Roundtable was about the degree of reliance by advisers and other investors on recommendations by proxy advisory firms. It would be much easier to discuss this issue in a concrete way if there were better data available. One of the things that prevents the development of this type of data is the practical difficulty that arises with respect to the recovery of voting data from SEC filings.
Mutual funds must file voting data on Form N-PX. A description of the disclosure obligations is here. In the current format, the Form is very difficult to use. As one commentator writing to the Investor Advisory Committee described:
- given how N-PX reports are currently submitted, in unstructured plain text formats, undertaking such a project requires considerable time and effort, since before one can compute these simple summary statistics, he or she needs to first reverse-engineer the formats the funds use to report their votes (and different funds do use many different formats, and even the same fund may switch from one format to another from one year to the next), then write and debug computer scripts to extract these votes, and only then it is possible to compute such summary statistics. Similarly, with unstructured data, there is no easy way to see how the voting patterns (e.g., the frequency of supporting management-proposed directors, or opposing shareholder proposals) of a particular fund evolve over time. With tagged data, such questions could be answered virtually instantly.
Michelle Edkins at BlackRock referenced the obligation to file the Form and recommended that advisers provide "high level" data about voting results. This would be useful but an even better result would be to require the filing of the data in an interactive format. This would allow investors and issuers to study voting patters and develop their own conclusions. This approach is consistent with the recent recommendation of the SEC's Investor Advisory Committee.