Carl Icahn is escalating his attacks on a U.S. Securities and Exchange Commission plan that he warns will make it harder for shareholders to hold companies accountable for poor performance.
In a Feb. 7 letter to the SEC, the 83-year-old activist investor called a proposed overhaul of shareholder voting rules “a big step backward” for corporate governance. The billionaire argued the changes would unfairly tip the scales toward management in elections that determine corporate strategy and who sits on the board.
At issue are a series of SEC proposals announced in November that would rein in proxy advisory firms and make it harder for investors to get their petitions on corporate ballots. The revamp is particularly relevant to Icahn, who’s frequently used shareholder elections to oust directors.
“Companies spend a fortune to protect the status quo,” Icahn said in an interview. “The agenda of the boards — their agenda is different than the shareholders they’re supposed to protect.”
On the other side of the fight are corporate executives who claim that shareholder campaigns unfairly target them and prevent management from executing on long-term strategies. The U.S. Chamber of Commerce and other business groups have long pushed for more regulation of proxy advisers and for rules that would help insulate companies from shareholder petitions on contentious issues like climate change and human rights abuses.
Proxy advisers are paid by mutual funds and other investors to conduct research and ultimately make recommendations on how shareholders should vote their stock. The firms play a crucial role for investors like Icahn because their advice can often determine whether activist campaigns are successful.
The SEC has been deluged with comment letters from pension funds, hedge funds, business executives, and religious and social groups over its plans. SEC commissioners will have to hold a second vote for the rules to become final. Icahn’s letter follows a Wall Street Journal op-ed he wrote in November blasting the SEC proposals.
SEC Chairman Jay Clayton, who was appointed by President Donald Trump, and Republican SEC Commissioner Elad Roisman have both said that the proxy voting process needs to be revamped.
Earlier this month, Roisman gave a speech defending the agency’s approach, saying that much of the criticism has been “based entirely on misinformation” and riddled with “myths.” Roisman, who is leading the SEC’s work on the issue, specifically rejected a frequent claim that the regulator is doing the bidding of corporate lobbyists.
An SEC spokeswoman and a lawyer in Roisman’s office declined to comment on Icahn’s letter.
Icahn, a Trump supporter who has broadly defended the president’s de-regulatory agenda, didn’t accuse the SEC of intentionally doing the bidding of big business. But he insisted that the agency’s proposals would inappropriately give corporate insiders new standing to sue proxy advisers for simply issuing analysis that companies disagree with. Roisman has disputed that the SEC rule changes would do that.
In the SEC’s plans, proxy advisers would generally be required to share their recommendations twice with management before shareholders could see them. Proxy advisers would also have to disclose conflicts of interest.
“It’s very hard, very expensive for someone to go in and try to fight them,” Icahn, in the interview, said of corporate management. “Now they’re going to make it harder.”