The text as introduced · 1,033 words
By: Hughes
S.B. No. 2337
A BILL TO BE ENTITLED
AN ACT
relating to the provision of proxy advisory services in connection
with certain entities domiciled in this state.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 2, Chapter 21, Business Organizations
Code, is amended by adding Subchapter T to read as follows:
SUBCHAPTER T: PROXY ADVISORS
Sec. 21.1001. DEFINITIONS. In this subchapter:
(1) "Company" means a publicly traded, for-profit
company organized or created under the laws of this state or having
a principal place of business in this state.
(2) "Company proposal" means any proposal made by a
company that is included in a company's proxy statement, including
but not limited to proposals regarding director elections,
executive compensation, corporate transactions and structure,
auditor selections, and other similar measures.
(3) "Investment manager" means a person or company
who, for compensation, provides professional investment
management services. The term does not include:
(A) an employee or member of an advisory
committee of a public retirement system; or
(b) a seller of security interests.
(4) "Proxy advisor" means a person or entity who, for
compensation, provides proxy advisory services to the shareholders
of a company, or to other interested parties, including but not
limited to investment managers.
(5) "Proxy advisory services" includes the provision
of any of the following services in connection with or relating to
a company:
(A) advice or recommendations on how to vote with
regard to measures under shareholder consideration, including
proxy proposals and company proposals;
(B) proxy statement research and analyses,
including with regard to proxy proposals and company proposals;
(C) corporate governance ratings and research or
other similar services;
(D) proxy voting policy development; or
(E) proxy vote administration, including through
the use pf proxy vote management software or other similar
services.
(6) "Proxy proposal" means any proposal made by a
shareholder to a company that is included in the company's proxy
statement.
(7) "Shareholder" includes a shareholder, unitholder,
limited partner, or other equity owner of a company.
Sec. 21.1002. OBLIGATION TO DISCHARGE DUTY BASED SOLELY ON
CERTAIN FINANCIAL INTERESTS. (a) Except as otherwise provided in
this section, a proxy advisor shall provide proxy advisory services
solely in the best financial interest of the shareholders of a
company, based on quantitative, impartial standards, for the sole
purpose of maximizing financial return and control associated
levels of risk.
(b) For purposes of this section, proxy advisory services
are not provided solely in the best financial interest of the
shareholders if based, all or in part, on non-financial factors,
including any commitments, initiatives, policies, targets, or
subjective or value-based standards pertaining to:
(1) environmental, social, or governance (ESG)
investment principles;
(2) diversity, equity, or inclusion;
(3) social credit or sustainability scores; or
(4) membership in, or association with, any non-profit
organization, coalition, initiative, institution, industry, or
similar organization that bases its evaluation or assessment of a
company's value on non-financial factors.
(c) For any proxy advisory services that are not provided
solely in the best financial interest of the shareholders, the
proxy advisor shall:
(1) include a conspicuous warning with the provision
of each such proxy advisory services that they are not made solely,
and may not be, in the best financial interest of the shareholders;
(2) use best efforts to obtain a prompt, written
acknowledgment of the warning required by subpart (a) herein from
each recipient shareholder or other interested party, as
applicable;
(3) immediately notify the company that is the subject
of such proxy advisory services, including full disclosure of all
related proxy advisory services, the basis of the proxy advisor's
advice and recommendations under this subsection, and all
recipients of each such proxy advisory services; and
(4) publicly and conspicuously disclose on the
homepage or front page of the proxy advisor's website that its proxy
advisory services include advice and recommendations that are not
made solely, and may not be, in the best financial interest of
shareholders.
Sec. 21.1003. VOTING RECOMMENDATIONS; CONFLICTS. (a) If a
proxy advisor provides proxy advisory services regarding a company
to multiple shareholders or other interested parties that include
voting recommendations that differ in any material respect
regarding the same proxy proposal or company proposal, the proxy
advisory services shall be considered not to be in the best
financial interest of the shareholders.
(b) For any proxy advisory services described in Subsection
(a), in addition to complying with the requirements of Section
21.1002(c), the proxy advisor shall immediately:
(1) notify each recipient shareholder or other
interested party in writing of the conflicting advice or
recommendations, including full disclosure of all related advice or
recommendations and the proxy advisor's basis for such advice or
recommendations;
(2) notify the company that is the subject of the proxy
advisory services in writing of the conflicting advice or
recommendations, including disclosure of all related
recommendations, the proxy advisor's basis for the
recommendations, and the recipients of each recommendation; and
(3) publicly and conspicuously disclose on the landing
page or front page of the proxy advisor's website that its proxy
advisory services include advice and recommendations that are in
material conflict with proxy advisory services provided to other
shareholders or interested parties.
Sec. 21.1004. VIOLATIONS; DECLARATORY JUDGMENT. An
affected party, including the company that is the subject of the
proxy advisory services, any shareholders of the company, or other
interested parties, may bring an action under Chapter 37, Civil
Practice and Remedies Code, to determine whether a proxy advisor
has committed a violation of this subchapter.
SECTION 2. The changes in law made by this Act apply only to
proxy advisory services rendered on or after the effective date of
this Act. Proxy advisory services rendered before the effective
date of this Act are governed by the law in effect on the date the
contract or other agreement for the services was entered into, and
the former law is continued in effect for that purpose.
SECTION 3. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2025.
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