The recent Securities and Exchange Commission decision curbing proxy voting power is a victory for shareholders. The Department of Labor (DOL) should reinforce and expand this victory by passing its proposed amendments to the Employee Retirement Income Security Act (ERISA), and it should include its own limits on proxy voting. The misuse of environmental, social, and governance (ESG) investing strategies, including through proxy actions, and the self-interest of some fund managers is forcing the DOL to act to safeguard the interest of ERISA participants.
The proposed rule makes clear that ERISA managers cannot substitute their own or proxy advisor social or political goals for plan participants’ financial interests. DOL’s reiteration of long-established fiduciary standards clarifies and provides certainty regarding the impermissibility of such actions under U.S. labor law.
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