Government Accountability Office Urges Reform in Plan Proxy Voting

The Government Accountability Office (GAO) has urged Congress and the Department of Labor (DOL) to tighten rules for proxy voting in defined contribution and defined benefit retirement plans. The recommendations apply to the voting of any shares held in participant accounts, whether company stock or not. The GAO urged the DOL to be more aggressive in its investigations and enforcement procedures and suggested that Congress consider allowing the agency to assess monetary damages for improper proxy voting. The report argues that both fiduciaries who vote shares, as well as proxy voters who may vote shares on behalf of employees (such as mutual funds) are not subject to adequate disclosure rules about their voting guidelines and are subject to multiple potential conflicts of interest that may encourage them to side with management rather than the best interests of plan participants. It recommended greater us of independent fiduciaries when company stock is voted.

The DOL responded that it did not believe the problems merited this additional effort and that the imposition of additional requirements would discourage some companies from operating plans. The report, titled "Additional Transparency and Other Actions Needed in Connection with Proxy Voting" is available from the GAO web site at this link.