(The Center Square) – Texas lawmakers are taking additional measures against proxy advisory firms that oppose companies redomiciling to Texas as Dell shareholders approved redomiciling to Texas from Delaware over the objection of proxy advisers.\u00a0<\/p>\n
Proxy advisers are financial firms that research shareholder votes and make recommendations to institutional investors. They \u201chold positions of trust for their clients, and that trust is broken when the proxy advisors recommend votes that are based on politics, social issues, personal vendettas, or anything other than financial returns,\u201d state Sen. Bryan Hughes, R-Minneola, said when he announced<\/a> the need for a hearing last month. Hughes chairs the Texas Senate Committee on State Affairs.<\/p>\n In May, Dell Technologies announced<\/a> it was moving it legal home from Delaware to Texas. Its board of directors recommended its stockholders approve its redomestication at its annual stockholder meeting on June 25.<\/p>\n On Thursday, \u201cwith 97% approval, Dell shareholders voted to bring our legal home to Texas. This is home and where we\u2019ve always belonged. Texas gave us the talent, the universities, and the environment to build something that lasts. Proud to make it official. Let\u2019s go,\u201d Dell founder and CEO Michael Dell said.<\/a><\/p>\n The vote continued a movement known as DEXIT, and in this case, DEXIT to Texas<\/a>. Just two days before, Axiom Space announced<\/a> it was redomiciling to Texas, also leaving Delaware.<\/p>\n ExxonMobil also announced it was redomiciling from New Jersey to Texas, prompting proxy advisers New York-based Institutional Shareholder Services (ISS) and California-based Glass Lewis to urge shareholders to vote against doing so. Shareholders ignored them and overwhelmingly supported the move. Attorney General Ken Paxton then sued<\/a> ISS, alleging it attempted to obstruct ExxonMobil from reincorporating.\u00a0\u00a0<\/p>\n President Donald Trump issued an\u00a0executive order<\/a>\u00a0to address the issue, but it\u2019s been held up in federal court. The U.S. House Financial Services Committee also held a hearing<\/a> last year, referring to proxy advisers as cartels.\u00a0<\/p>\n U.S. Rep. Ann Wagner, R-Missouri, said ISS and Glass Lewis control 97% of the proxy advisory market. \u201cThat concentration alone would warrant scrutiny,\u201d she said.<\/a><\/p>\n But what was more troubling was their efforts to dictate shareholder vote outcomes, she said.\u00a0<\/p>\n She and U.S. Rep. Bryan Steil, R-Wisconsin, filed a bill to \u201cimpose new rules on\u00a0the proxy advisor duopoly that require\u00a0strong transparency disclosures\u00a0and prevent\u00a0conflicts of interest that have tarnished proxy advice and corrupted corporate governance.\u201d It prohibits robo-voting, prohibits proxy firms from providing consulting services\u00a0and requires their clients to issue annual public reports on proxy voting.\u00a0<\/p>\n Roughly\u00a070% of outstanding shares in publicly traded U.S. companies are held by institutional investors. To save costs, many rely on\u00a0proxy advisory firms\u2019 recommendations on how to vote, the Manhattan Institute explains.<\/a>\u00a0<\/p>\n Last fall, Texas Attorney General Ken Paxton launched<\/a>\u00a0an investigation into ISS and Glass Lewis for allegedly \u201cpotentially misleading institutional investors and public companies by issuing voting recommendations that advance radical political agendas rather than sound financial principles.\u201d That was after he and 20 other Republican attorneys general launched an investigation in 2023 alleging their diversity, equity, and inclusion (DEI) policies interfered with their ability to honor their legal obligations, The Center Square reported.<\/a><\/p>\n Last year, the Texas Legislature passed Hughes\u2019 bill, Senate Bill 2337<\/a>, which Gov. Greg Abbott signed into law, to ensure that proxy advisers make recommendations based on financial returns and disclose when they don\u2019t. In response, ISS and Glass Lewis sued to block it from going into effect. A federal judge enjoined its enforcement.\u00a0<\/p>\n \u201cProxy voting recommendations that do not look to the financial interests of shareholders are inherently fraudulent and may be inconsistent with the fiduciary duties of the asset managers who rely on them,\u201d Hughes said. \u201cTexas shareholders, and the millions of Americans whose retirement savings are voted on the basis of these recommendations, deserve to understand what is actually driving the conclusions of ISS and Glass Lewis.\u201d<\/p>\n At the Senate<\/a>\u00a0hearing, Hughes<\/a> and others raised concerns about ISS reportedly recommending against state pension plans investing in oil and gas development. Texas law prohibits funds from doing so because of so-called Environmental Social Governance (ESG) policies. Those that do are placed on a divestment list.<\/a><\/p>\n Dallas-based Foley & Lardner law firm partner Christopher Babcock and Gibson Dunn appellate law firm partner Brad Hubbard testified that ISS and Glass Lewis weren\u2019t disclosing key information to clients and their practices were conflicts of interest. When advising companies against redomiciling to Texas,\u00a0\u201cNot once in any of their published recommendations did they disclose that these firms, urging shareholders to reject coming to Texas, were themselves in active litigation with the state,\u201d Babcock said.<\/p>\n Hubbard said the companies providing voting advice and consulting services was a conflict of interest. The practice of \u201ccharging public companies hundreds of thousands of dollars for guidance on securing favorable voting recommendations, while simultaneously providing investors with \u2018independent\u2019 advice on how to vote on those same company’s proposals, creates a significant structural conflict of interest,\u201d he said.\u00a0<\/p>\n ISS and Glass Lewis were invited to provide testimony to the committee, Hughes said. ISS declined; Glass Lewis didn\u2019t respond.\u00a0<\/p>\n State lawmakers are now considering expanding state regulation, including requiring additional transparency measures.<\/p>\n","protected":false},"excerpt":{"rendered":"(The Center Square) – Texas lawmakers are taking additional measures against proxy advisory firms that oppose companies redomiciling…\n","protected":false},"author":2,"featured_media":263056,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[132,134,133,25292,918,4491,118098,27],"class_list":["post-351752","post","type-post","status-publish","format-standard","has-post-thumbnail","category-austin","tag-austin","tag-austin-headlines","tag-austin-news","tag-delaware","tag-economy","tag-national","tag-new_jersey","tag-texas"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/351752","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/comments?post=351752"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/posts\/351752\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media\/263056"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/media?parent=351752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/categories?post=351752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-tx\/wp-json\/wp\/v2\/tags?post=351752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}