SEC Commissioner Gallagher Comments on Proxy Advisors Roles in Corporate Governance

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According to a high ranking US securities regulator, lawmakers should review the role that advisory firms play during corporate regulations and determine if regulatory measures are necessary to allow them greater roles during the process.

During a speech today in Dublin, US SEC Commissioner Daniel M. Gallagher said that instituting rules may provide too great reliance on proxy advisers in the same manner that investors rely on credit rating as agencies for mortgage backed securities that later caused the last great recession. He added that both regulators and investors themselves should review if the recommendations from these advisory firms help shareholders in the long run.

Many institutional investors, like public pension funds give great weight to recommendations from firms such as the Institutional Shareholder Services and Glass Lewis and Co for their say on corporate elections.

Gallagher said during the symposium on corporate governance, "It is critically important for policy makers to understand, evaluate and if necessary address the practices and business models of proxy advisory firms. No one should be able to outsource their fiduciary duties."

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SEC, United States

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