Forthcoming Director Briefing – Should Proxy Advisors be Regulated?
11/09/2017
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ASIC Commissioner John Price, who has carriage of the proxy adviser regulation project, has agreed to attend our 31 October lunchtime directors briefing in Sydney. This is a good opportunity for issuers to discuss and understand various views on proxy adviser regulation with the Commissioner.

Following a May roundtable between ASIC and stakeholders that interestingly excluded investors (see HERE) there has been continued pressure for proxy adviser regulation. This has been fuelled by difficulties in issuers trying to engage effectively with one or more of the proxy advisers before their AGM.

Unfortunately, some of the problems relate to issuers being ill prepared and poorly advised in their consideration and implementation of changes to their boards, executive remuneration, constitutions, and other matters requiring shareholder approval. There is little appreciation of the best windows to engage with proxy advisers such that issuers can have their full attention.

Of course, some of the problem lies with inadequate resourcing in the proxy advisers, which itself stems from the unwillingness of their superannuation fund and fund manager clients to pay more to ensure they are adequately and competently resourced. Regulation of proxy advisers may, in the end, result in institutional investors having to pay more.

ASIC, to keep the ball rolling, sent a letter to proxy advisers with overseas parents requesting contact details so that ASIC could write to them and advise of the need for their local subsidiaries to engage with issuers prior to issuing a “no” recommendation. ASIC did acknowledge that there was no appetite for a proxy adviser “code of conduct”. Presumably such a code would include provision for engaging before a “no” recommendation is made.

Guerdon Associates conducts regular lunchtime briefings for directors with guests including regulators, proxy advisers, fund managers, superannuation funds, proxy solicitation firms and others in an effort to ensure stakeholders in remuneration and other governance matters are informed. Usually, attendance is by invitation as we try and limit director numbers in order to ensure a good discussion. The Chatham House Rule applies.

Given the keen interest in this subject we are considering making provision for more directors to attend than usual. Therefore, if you are an ASX-listed company director and have a view one way or the way, or particularly positive or negative experiences with the proxy adviser engagement and recommendation process, let us know at info@guerdonassociates.com and we will endeavour to ensure you are on the invitation list (note that numbers will still remain limited).

© Guerdon Associates 2020
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