The Proxy Process Needs an Overhaul

Proxy voting was designed to empower investors by giving them a say in decisions in the companies they own. Today's proxy process does not align with this vision. On the contrary, it has weakened investor participation, drained company resources, and is more of a barrier than a bridge to shareholder engagement. This process undermined the primary purpose of public markets: to give hardworking Americans the opportunity to create long-term wealth. At Nasdaq, we have long advocated for reform of the proxy process. We are encouraged by reports that the Trump administration is considering an executive order to address this issue.

A major obstacle is the undue influence of trusted advisory firms in this process. Due to the sheer number of public companies and offerings, institutional investors managing huge portfolios have come to rely on trusted advisory firms as important intermediaries. These firms do not have to disclose or explain the criteria underlying their voting recommendations. They are also under no obligation to correct factual errors in their manuals. Proxy advisors are not required to disclose conflicts of interest, leaving investors and companies in the dark about potential biases that could influence voting recommendations. This dynamic leaves important decisions in the hands of a few advisory firms, which exert a disproportionate influence on the trajectory of corporations while operating with minimal accountability.