Texas Attorney General Ken Paxton is standing his ground on a controversial state law aimed at regulating the influence of proxy advisors in the corporate sector. S.B. 2337, which is scheduled to take effect on September 1, seeks to ensure that voting recommendations provided by proxy advisors to investors are based squarely on financial grounds unless they explicitly state otherwise. According to the Texas Attorney General's Office, this legislation is a countermeasure to what they see as an ideological push by certain advisors under the guise of investment guidance.
The focal point of the law is the contention that proxy advisory firms may be covertly promoting agendas that align with progressive political ideologies, particularly those related to diversity, equity, inclusion (DEI), and environmental, social, and governance (ESG) matters. Paxton, in defense of S.B. 2337, is actively working to dismiss lawsuits from firms such as Glass Lewis and Institutional Shareholder Services (ISS). They have been seeking a preliminary injunction to halt the implementation of the law. "The role of a proxy advisor is to provide sound guidance based on financial considerations, not use their position to promote woke, left-wing ideology," Paxton stated, pinpointing the law's intent to prevent quietly to promote political goals, as reported by the Texas Attorney General's Office.
The legal tug-of-war between the state and proxy advisors has intensified in Texas with high-profile firms taking the state to court over the law. Glass Lewis and ISS, two significant players in the proxy advisory arena, have mounted legal challenges, claiming that the law infringes on their rights and potentially disrupts the advisory landscape for investors and companies alike. The Attorney General's Office has characterized the legal maneuvers by these firms as a resistance to greater transparency in corporate advising practices.
Amidst the legal contention, Paxton continues to push back, reinforcing his argument that transparency is key in the realm of corporate investment. In relation to the ongoing lawsuits, his stance remains unyielding. "S.B. 2337 stops liberal activists posing as proxy advisors from giving guidance based on their ideological goals without making that clear to their clients," Paxton communicated, highlighting the law's requirement for proxy advisors to divulge any non-financial motivations that might underpin their recommendations, as per the Texas Attorney General's Office.
