As the Securities and Exchange Commission (SEC) sets its next short-term agenda, the Council of Institutional Investors (CII) has highlighted three categories of rulemaking priorities that the commission should consider: executive compensation transparency with non-GAAP reconciliation, proxy vote reliability, and proxy vote transparency.
The chair of the regulatory agency sets its agenda, and it is updated twice a year. The initial priorities of SEC Chair Paul Atkins were unveiled in September, with projects aimed at simplifying or scaling back rules to promote capital formation and expanding access to different types of investments for retail investors.
In particular, the CII requested that the SEC address two of its three priorities under a rulemaking project called rationalization of disclosure practices and restore a former project on proxy process amendments to address its third priority.
For the disclosure rationalization project, the SEC staff is drafting recommended proposed amendments—for the commissioners to consider—that would facilitate material disclosure by companies and shareholders’ access to the information. The commission had targeted a proposal in the spring of 2026, but it is likely to be delayed given the ongoing government shutdown that began on October 1, 2025. During a lapse in funding, the SEC does not engage in non-emergency rulemaking. It is unclear when the shutdown will end at this juncture.
Executive Compensation and Non-GAAP Reconciliation
This is not a new request. The CII first filed a rulemaking petition in 2019, asking the SEC to close a loophole in regulations governing public companies’ use of financial measures based on something other than GAAP to determine executive compensation.
The investor group has since continued to advocate for action, but both former chairs Jay Clayton and Gary Gensler did not put the item on the rulemaking agenda as the agency in part had numerous other priorities.
In particular, the CII is calling for a rule that would improve the presentation of non-GAAP measures in the proxy statement’s Compensation Discussion and Analysis (CD&A). A wide variety of performance metrics used for executive pay are often based on non-GAAP adjusted measures that are not reconciled to GAAP, which can be misleading.
While there are rules on the use of non-GAAP measures, they do not apply to the target measures for compensation in CD&A–an important source of information for investors when evaluating executive pay.
The CII believes the SEC should require companies to reconcile the non-GAAP measures used for executive pay to GAAP and provide a narrative description of why these non-GAAP financial measures are more appropriate than GAAP figures.
This is especially important because many large public companies disclose adjusted earnings or other financial measures that do not follow official GAAP.
The CII represents employee benefit funds, foundations, and endowments with $5 trillion in combined assets under management.
The group cited research showing a vast majority of large companies use non-GAAP figures, but they do so largely because these numbers show better performance than under comparable official GAAP reporting.
“And, importantly, many of these same companies use non-GAAP earnings as a key criterion in setting executive compensation,” CII General Counsel Jeffrey Mahoney wrote on October 22.
Class-by-Class Vote Results
As for the projects related to corporate governance, CII emphasized the importance of the principle of one share, one vote.
In the last two decades, companies like Alphabet and Meta have set up dual- or triple-class capital structures with unequal voting rights.
“Often over time, this founder-knows-best approach presents increasing risk to long-term investors by entrenching management and blindsiding executives to the need for change,” Mahoney wrote. “That lack of accountability at the top can also harm corporate culture and the community at large.”
CII’s policies state that that companies with dual-class stock structures should incorporate time-based sunset provisions in their governing documents to convert to one-share, one-vote within seven years of an initial public offering (IPO) unless all classes of shareholders, voting on a one-share, one-vote basis, periodically approve keeping the dual-class structure.
The CII requested that the SEC consider including a provision in the disclosure rationalization project that would improve the transparency of the voting results at multi-class companies.
End-to-End Vote Confirmation
The investor advocate said that a proxy voting system should provide end-to-end confirmation so that both companies and shareowners can be assured that votes were properly cast and included in the final tally as instructed.
CII is working together with the Society for Corporate Governance to ensure that the various intermediaries in the voting chain ensure that beneficial shareholders can confirm that their votes in contested director elections were counted correctly.
At the same time, CII said that the SEC should monitor the progress being made in end-to-end vote confirmation and consider proposals when necessary.
Mahoney flagged a solution offered by former SEC Commissioner Allison Herren who suggested that “all participants in the voting chain to grant to issuers, or their transfer agents or vote tabulators, access to certain information relating to voting records, for the limited purpose of enabling a shareholder or securities intermediary to confirm how a particular shareholder’s shares were voted.”
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