A proxy adviser code of conduct already exists
10/12/2017
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We have been keeping readers informed of the calls for more regulation of proxy advisers (see HERE, HERE and HERE). Many have suggested that proxy advisers should sign up to a code of conduct, including, for example, the Australian Investor Relations Association (AIRA).

But, unknown to many, there already is a ‘code of conduct’. Not only that, but its principles appear sound.

The Best Practice Principles Group (BPPG) was formed in February 2013 to promote greater understanding of the corporate governance or ESG research and support services provided to professional investors and other capital markets participants.

The BPPG is open to those industry participants who provide advice and research on shareholder voting. Some industry participants are proxy advisers, while others may be organisations that give advice, provide research, data and/or vote administration. The business models of the BPP signatories is extremely varied.

The website for the BPPG is worth a look (see HERE).

Any organisation that supports investors in their stewardship or governance responsibilities can become a signatory and participate in the on-going development of the Principles.

The current proxy firm signatories to the Best Practice Principles for Shareholder Voting Research are:

  • Glass Lewis Inc (a subsidiary of which is CGI Glass Lewis in Australia)
  • ISS (that has an Australian branch)
  • Manifest (a UK provider of corporate governance and shareholder voting services)
  • PIRC (Pensions & Investment Research Consultants Ltd, a European shareholder advisory service)
  • Proxinvest (a French independent proxy firm)

The three main principles of the code of conduct are as follows.

Principle 1: Service Quality

Signatories provide services that are delivered in accordance with agreed client specifications. Signatories should have and publicly disclose their research methodology and, if applicable, “house” voting policies.

Principle 2: Conflicts of Interest Management

Signatories should have and publicly disclose a conflicts-of-interest policy that details their procedures for addressing potential or actual conflicts of interest that may arise in connection with the provisions of services.

Principle 3: Communications Policy

Signatories should have and publicly disclose their policy (or policies) for communication with issuers, shareholder proponents, other stakeholders, media and the public.

While these principles may appear limited, the Principles are supported by detailed guidance that explains the background and relevance of the Principles.

The signatories to the BPPG are required to disclose their policies on their website or make them available on request. Both Glass Lewis and ISS have detailed statements on their global website (see HERE and HERE).

The BPPG does have a feedback and complaints procedure (see HERE) although it would seem that this is more for the clients of the firms rather than issuers.

Issuers and their directors who have been particularly concerned with the quality of proxy adviser research may want to review the BPPG website, the Principles, the statements of the proxy advisers, and compare it to their practices.

© Guerdon Associates 2021
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