WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission handed public companies a procedural victory on Thursday in their efforts to reduce the influence of proxy advisory firms, rescinding a pair of staff letters that critics said encouraged mutual funds to rely on their recommendations.

FILE PHOTO: The seal of the U.S. Securities and Exchange Commission hangs on the wall at SEC headquarters in Washington, U.S., June 24, 2011. REUTERS/Jonathan Ernst/File Photo

The move by the SEC to scrap the 14-year-old staff letters could be an indication the agency is considering a broader overhaul of corporate governance rules.

The SEC, which is expected to hold a staff roundtable on the proxy process in November, said it was rescinding the 2004 no-action letters to facilitate the discussion at the event.

The role of proxy advisers is part of a broader debate over how to improve governance at U.S. companies, which since the financial crisis have faced growing pressure from investors to consider issues like climate change and employee diversity.

Proxy advisers often support shareholder proposals in those areas or can go against corporate leaders in other ways.

The letters provided assurances to institutional investors they could resolve any potential conflicts of interest with public companies by relying on proxy firm recommendations. Critics have argued the letters led shareholders to overly rely on those recommendations.

The decision was hailed by the business lobby. Groups like the U.S. Chamber of Commerce have long complained that two proxy advisory firms, Institutional Shareholder Services and Glass Lewis & Co, dominate the industry with insufficient oversight.

“For far too long, proxy advisory firms have exerted undue influence over manufacturing companies, trying to force business decisions without any regard to investors’ best interests,” said Jay Timmons, president and chief executive of the National Association of Manufacturers. “Manufacturers support increased SEC oversight over proxy advisory firms to restore fairness to the system.”

In separate statements, ISS and Glass Lewis said the SEC’s move does not alter existing law, their business operations or relationships with institutional investors.

“Corporate lobbyists have created a mythology surrounding these letters in an attempt to undermine the important work we do for our sophisticated institutional investor clients,” said ISS General Counsel Steven Friedman.

“Glass Lewis is committed to ensuring, that in its role as a proxy advisor, institutional investors can comply with the fiduciary duties they owe to their respective clients, and companies are entitled to a fair, reasonable and independent assessment,” Glass Lewis CEO Katherine Rabin said in a statement.