Social Investment Forum Commends Senate For Joining House of Representatives in Approving Financial Reform Bill
Legislation Contains Key Provisions Long Sought by Socially Responsible Investors; SIF Continues Calls for Majority Voting Standard, Annual “Say on Pay” Vote, and Sufficient Funding for SEC
WASHINGTON--The Social Investment Forum (SIF), the national non-profit association of professionals, firms and institutions engaged in socially responsible and sustainable investing (SRI), today issued a statement praising the U.S. Senate for passing financial services reform legislation that contains a number of major elements sought by socially responsible investors.
In the statement, SIF CEO Lisa Woll said: “We want to recognize the tireless efforts required to ensure that meaningful financial reform legislation emerged from the U.S. Senate. It has been almost three years since the American economy began to suffer from what has become one of our nation's most severe financial crises and a clear call to action for financial reform. The many changes in the Senate financial reform bill are long overdue.
The Social Investment Forum and its members championed a series of measures to combat the loopholes and weaknesses in regulation of U.S. financial markets: improved corporate governance (granting shareholders rights to nominate alternative candidates to boards or “proxy access,” requiring a majority voting standard for the election of board directors, and mandating a shareholder advisory vote on executive compensation or “say on pay”); creating a financial regulator dedicated to protecting consumers; regulation and oversight of all investment products including hedge funds and derivatives; providing sufficient resources to regulators, with a particular focus on adequate funding for the Securities and Exchange Commission (SEC); creation of a systemic risk regulator; and enhanced oversight and higher standards of accountability for credit rating agencies.
While not all of our priorities are reflected in the final legislation, we are pleased that so many of the key issues that we brought to the table are reflected in the final bill approved by the Senate. In particular, the following elements of the legislation are of particular importance to socially responsible investors: proxy access, creation of a Consumer Financial Protection Bureau and oversight of derivatives markets. SIF also welcomed new disclosures on pay disparity and payments for conflict minerals, as well as new restrictions on broker voting without explicit instructions from shareowners.
When we laid out our financial reform priorities in fall 2009, we noted that action must support good governance, transparency, stronger regulations to protect investors and consumers, and concerted attention on environmental and social issues within businesses and financial institutions. The Social Investment Forum and its members provided congressional staff with information about our priorities throughout this process. The fact that financial reform accomplished many of the priorities of socially responsible and sustainable investors is another sign that the key principles that have been at the core of our work for years are being widely embraced. The financial markets, investors and consumers will be better off as a result of the action taken by the Senate and House of Representatives. We look forward to seeing this legislation signed into law by President Obama.”
For priorities that did not end up in the final legislation, SIF will continue to press for a majority voting standard for directors for corporate boards, an annual “say on pay” vote, and adequate funding for the SEC (SIF had supported self-funding). Under most state laws, including Delaware where most U.S. corporations are registered, the default standard for uncontested corporate elections remains a plurality vote. Therefore, directors can be elected or reelected even if a majority of votes are withheld from them. A majority voting standard would end this practice and use very basic democratic principles to hold directors accountable to shareholders.
While the financial reform bill will require companies to hold a “say on pay” vote, they will have the option of holding votes only once every three years. Companies should hold advisory votes on pay every year.
Finally, as a result of this legislation, the SEC will have to conduct numerous studies and write many more new rules. This will add to its already significant regulatory responsibilities. Therefore, absent self funding, SIF and its members will continue to call on Congress to provide enough funding to the SEC so that it can be an effective regulator.
The Social Investment Forum (http://www.socialinvest.org) advances investment practices that consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact. The Social Investment Forum is the U.S. membership association for professionals, firms, institutions and organizations engaged in socially responsible and sustainable investing (SRI). SIF members support SRI through such strategies as portfolio selection analysis, shareholder advocacy and community investing.