Senate committee advances bill to require transparency and economic analysis from proxy advisers, 9-2

The Senate Standing Committee on Economic Development, Tourism and Labor voted 9-2 to report Senate Bill 183, legislation requiring transparency and accountability from proxy advisory firms that provide voting recommendations to institutional investors.

Sponsor Senator Matt Nunn said the bill aims to prevent proxy advisers from pushing recommendations based on "non pecuniary" agendas — ideological, political or social interests — when those interests are not directly and materially tied to financial outcomes. "Proxy voting recommendations should be solely in the interest of shareholders," Nunn said, and the bill would require a written economic analysis when a proxy adviser's recommendation conflicts with a company's independent board.

Nunn told the committee the measure also targets inconsistent advice to different clients and would treat failure to comply as a deceptive trade practice under Kentucky's consumer protection law. He cited two dominant firms, ISS and Glass Lewis, saying they account for over 90% of proxy advising services in the U.S.

During questioning, Senator Clemens tested the bill's scope with hypotheticals — asking whether an outside organization urging its members to vote a certain way would be covered — and whether proxy advisers are registered under federal securities laws or with Kentucky. Chris Nolan, a legislative consultant with the American Property Casualty Insurance Association, told the committee there is "some oversight but very little federal oversight" and "definitely no oversight in Kentucky."

Senator Thomas explained his 'no' vote by saying he did not see a problem with advisers providing guidance based on environmental or other values, and argued investors should be free to take advice aligned with their personal criteria.

The clerk called the roll; the bill passed 9-2 and will be reported with a favorable recommendation. Nunn urged the committee the measure is nonpartisan and framed it as protecting investors' financial interests and Kentucky jobs.

Next steps: SB183 was reported favorably by committee and will proceed to the Senate calendar for further consideration.