North Carolina SB 1057: Required Disclosures/Proxy Advisory Services.

Bill Text

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 2
SENATE BILL 1057
Finance Committee Substitute Adopted 6/16/26

Short Title: Required Disclosures/Proxy Advisory Services. (Public)
Sponsors:
Referred to:
May 4, 2026
*S1057-v-2*
A BILL TO BE ENTITLED 1
AN ACT TO REQUIRE PROXY ADVISORY SERVICES TO MAKE CERTAIN 2
DISCLOSURES. 3
The General Assembly of North Carolina enacts: 4
SECTION 1. Legislative Findings. – The General Assembly finds the following: 5
(1) When shareholders hire professionals to manage investments, they reasonably 6
expect those professionals to perform services in the financial interest of the 7
shareholders and to make recommendations that will enhance investment 8
value based on financial analyses. 9
(2) There is a particular need to require disclosures from proxy advisors because 10
their advice is provided for hundreds of thousands of shareholder votes each 11
year. Few investors have the resources to independently research every 12
shareholder vote. Institutional investors often use proxy advisors for guidance 13
on how to exercise their shareholder voting rights in a manner consistent with 14
their fiduciary duties. 15
(3) Directors of publicly held companies also have fiduciary duties to their 16
shareholders and make recommendations in line with those fiduciary duties. 17
(4) Proxy advisors have recommended votes against company directors' guidance 18
and in favor of shareholder proposals based on environmental, social, or 19
governance (ESG) issues; diversity, equity, or inclusion (DEI) issues; and 20
social credit and sustainability scores but have not disclosed to investors that 21
the recommendations were made without conducting a financial analysis to 22
determine how the recommended votes would affect shareholder value. 23
(5) The chief operating officer of Glass Lewis, a major proxy advisor, stated 24
under penalty of perjury that Glass Lewis does not conduct a "written financial 25
analysis," as defined by this act, before recommending votes on shareholder 26
proposals, and that other proxy advisors do not do so either.
Yet proxy 27
advisors have advertised that the purpose of their recommendations is 28
maximizing, increasing, or protecting shareholder value. 29
(6) These findings raise concern that proxy advisors are engaged in fraudulent or 30
deceptive practices. They are not disclosing material information to their 31
clients, who reasonably believe that they are choosing between 32
recommendations of company directors and a proxy advisor that are based on 33
dueling financial analyses. 34
(7) Investors purchasing proxy advisory services should be informed when 35
recommendations against company management are or are not based on 36

General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 1057-Second Edition
financial analyses that consider the recommended vote's effect on the financial 1
value of the investment. Investors also should be able to access those analyses 2
upon request, in order to assess whether the analyses are sufficient to uphold 3
fiduciary standards. 4
(8) Requiring proxy advisors to provide clear, factual disclosures under these 5
circumstances helps investors evaluate whether a proxy advisor's 6
recommendations uphold institutional investors' fiduciary duties of prudence 7
and loyalty. 8
(9) Requiring proxy advisors to inform company directors of their 9
recommendations also promotes disclosures in line with fiduciary duties. For 10
example, company directors considering a shareholder proposal often have 11
additional information regarding the costs of the proposal and whether it is in 12
shareholders' financial interests. Notice of a proxy advisor's recommended 13
vote on the proposal allows directors seeking to uphold their fiduciary duties 14
to provide additional responsive information to their shareholders. 15
SECTION 2. Chapter 78C of the General Statutes is amended by adding a new 16
Article to read: 17
"Article 10. 18
"Proxy Advisor Transparency Act. 19
"§ 78C-110. Definitions. 20
The following definitions apply in this Article: 21
(1) Company. – A publicly traded for-profit corporation, limited liability 22
company, partnership, or other business entity. 23
(2) Company proposal. – Any proposal made by a company to its shareholders 24
that is included in the company's proxy statement, including, but not limited 25
to, any proposal relating to director nominations or elections, executive 26
compensation, corporate transactions, corporate structure, auditor selection, 27
or company policy on any subject. 28
(3) Default recommendation or policy. – A system or set of rules, principles, or 29
guidelines designed to assist with voting decisions on any company proposal 30
or proxy proposal. 31
(4) Person. – An individual, corporation, limited liability company, partnership, 32
association, or other legal or business entity. 33
(5) Proxy advisor. – A person who, for compensation, provides a proxy advisory 34
service to shareholders of a