New N-PX Disclosure Requirements: What it all means
As we settle into September, the Diligent Market Intelligence (DMI) research team has for months been focused on compiling the thousands of investor voting records from the previous proxy season. The annual wave of N-PX filings is a key point in our calendar year where we typically collect over 60% of our data as investment funds work to submit the key regulatory documents by the end-of-August deadline set by the Securities and Exchange Commission (SEC).
While mutual funds and other registered investment companies have long been required to report their votes, this year opens up a new reporting requirement for hedge funds and others to report their compensation-related votes. The move has led to a dramatic increase in filings with almost 11,000 at the time of writing compared to approximately 2,600 at the same point last year.
Under the new regime, the new cohort of N-PX filers are required to report how they voted proxies on:
• “say on pay”
• “say on frequency”
• golden parachute compensation in connection with a merger or acquisition.
DMI is collecting all of these new data points, as well as new disclosure on the number of shares voted, which we are working to make available to clients from the end of September.
Company officers and their advisors will likely benefit from the new transparency by identifying investors which had not publicly shared grievances, especially those with a mixed record of activism and passive investment. For instance, of the nearly 5,000 compensation-related votes logged by D.E. Shaw Group, 12% were logged against management recommendations.
And it will shine a light on where activists are supportive of at least some elements of their targets’ governance. Of Trian’s nine votes over the last year, the only vote against management’s recommendation was against Disney’s “say on pay” resolution.
This has all been made possible with an expanded team of DMI experts spread across multiple time zones who have to date sprinted to import a staggering 19,673,775 N-PX votes using an automated collection process.
“We have been examining the new format since May in preparation and filings have been coming in since July 1 and will continue through early September,” said DMI’s Sophie Miles, who heads up the marathon effort for the research team. “This year, the new 13F filers will see our workload significantly increase as we anticipate about 8,000 additional filings to come in compared to about 2,500 in previous years.”
To date, filings from just shy of 3,000 investors, 11,000 funds and over 22,000 issuers have been imported for processing by DMI.
"All of our Voting module clients are eagerly awaiting this data to complete their proxy season reviews and uncover new and unique insights that the new disclosures afford. Our dedicated support team will be ready to see to the demands for a variety of custom requests," Miles concluded.
