SEC wants hedge funds, endowments to disclose votes on exec salaries

The Securities and Exchange Commission (SEC) voted on Wednesday to propose several amendments to financial firms’ voting transparency rules, including requiring them to disclose voting procedures and outcomes on executive salaries.

If approved, the rule would require managers of hedge funds and pensions to report the process through which shareholders of the firm vote on top executives’ compensation.

Commissioners voted 4-1 in favor of the new rules.

Commissioner Allison Herren Lee, the former acting chair of the SEC, called the amendments “meaningful improvements” that will enhance voting disclosure to bring better transparency for stakeholders.

“It is critical for investors and the public—academics, policy makers, issuers, and a wide variety of market participants—to understand and evaluate the role of funds and managers in the capital markets,” Lee said in a statement. “Thus, how voting authority is exercised—or, in some cases, not exercised—is unquestionably significant to the investors who rely on intermediaries to vote their investment dollars.”

Hester Peirce, a Republican, released a statement voicing her opposition.

“Although a fund’s voting strategy can be an important part of the overall fund management strategy, how or why a fund votes, or even whether a fund votes on a particular issue at a particular portfolio company is unlikely materially to influence an investor’s choice to invest in a particular fund,” she said.

She also argued that the rule could politicize voting and sway it for the sake of public appearance rather than maximizing a firm’s returns.

Other proposed rules include standardizing how data files containing voting records are reported and requiring hedge funds to report whether they can cast a vote depending on if their securities are loaned out.

The new rules will be subject to a 60-day comment period following publication in the Federal Register.

Updated 5:12 p.m.