Victoria Geddes, Executive Director
Following FIRST Adviser’s ‘Time to talk to Proxy Advisers’ post last month, ASIC has published its review of proxy adviser engagement practices.
The Australian Securities and Investments Commission acted after business organisations complained some proxy firms are unwilling to engage, correct inaccuracies or give time for companies to clarify errors.
ASIC’s report did not find evidence that proxy advisers exert undue influence over the voting process or are unwilling to engage. It noted that in the 2017 AGM season “there were reports of large institutional shareholders deciding to vote against resolutions that were the subject of a ‘for’ recommendation by proxy advisers. This is consistent with representations made to ASIC by institutional shareholders that they do not follow proxy advisers’ recommendations automatically, but make their own voting decisions.” Also in relation to the average ‘against’ vote for resolutions attracting at least one ‘against’ recommendation by a proxy adviser, it was not sufficiently significant to alter the outcome of the resolution.
ASIC noted that both proxy advisers and companies have an equal obligation to ensure that shareholders have accurate information to enable them to make informed voting decisions. From the company perspective this includes:
- actively seeking out information about the engagement practices of proxy advisers (which are provided in detail on their websites)
- engaging proactively with proxy advisers outside of peak periods as an extension of ongoing active engagement with their shareholders
- releasing their notices of meeting to the market as early as possible – proxy advisers are subject to timing constraints such as voting deadlines and need to ensure their clients have adequate time to consider their advice
- ensuring disclosure to the market is fulsome, clear and not overly complex – proxy advisers should be able to base their analyses on publicly available information
- continuing to engage directly with investors regarding any voting decision – shareholders are ultimately responsible for making a decision on how they wish to vote
In terms of proxy adviser engagement ASIC found that there was:
- a willingness to engage with companies and make a copy of their report available to companies either prior to or after publication
- a desire to ensure independence from the companies that are the subject of their reports
- a willingness to receive feedback from companies in relation to potential factual errors and to correct material factual errors and
- their recommendations are just one of several inputs into shareholder’s decision making.
Click here for the ASIC report overview.