Gary Gensler, President Biden’s nominee to lead the SEC,
testified in a confirmation hearing on March 2 that the agency should require companies to disclose more about their political spending, climate risks and workforce diversity. Mr. Gensler also touched on concerns with price volatility driven by the wild swings in GameStop’s share price and proxy advisory reform.
While some Republican Senators questioned the materiality of these disclosures, Mr. Gensler noted that shareholder proposals requesting ESG disclosures have seen increased vote support at annual meetings. He also indicated that he supports Acting Chair Allison Lee’s efforts to increase climate risk disclosures (Ms. Lee recently
directed the Division of Corporation Finance to review existing climate disclosure standards.) However, Mr. Gensler stopped short of explicitly endorsing Nasdaq’s pending board diversity proposal that would require the board of each company listed on the exchange to include at least one woman and one self-identified minority (see first story in the newsletter). He did highlight the good performance of companies with diverse management and said he would investigate what demographic information investors are seeking.
On proxy advisory reform rules, Mr. Gensler did not advocate for repealing or rolling back the recently finalized reforms. He noted that he is supportive of a competitive proxy advisory market (as opposed to the current duopoly) but also stipulated his belief that proxy advisors provide a needed service, especially during the crush of proxy season (it is not clear if Mr. Gensler had seen
recent studies on the quality of ISS recommendations during proxy season, which contradict this assertion). He committed to working with the SEC staff to “see if there is something that needs to be addressed.”
Mr. Gensler is likely to win Senate confirmation by the end of March. The Center remains committed to engaging with the SEC on topics important to Subscribers and providing our expertise where necessary.
