The corporate regulator has urged proxy advisers to be more transparent in their dealings with companies and investors – particularly when it comes to ‘against’ recommendations.
Report 578, ASIC review of proxy adviser engagement practices, is the result of a 2017 ASIC roundtable between proxy advisers, investor representatives and relevant industry groups.
The report analysed the engagement policies of the four major proxy advisers in Australia: CGI Glass Lewis, ISS Australia, Ownership Matters and the Australian Council of Superannuation Investors.
ASIC also examined 80 proxy adviser reports where an 'against' recommendation was made in relation to one or more resolutions considered during a 2017 AGM (20 from each of the major four proxy advisers).
Concerns aired at the roundtable included: instances where proxy advisers appeared unwilling to engage, instances where they provided "very short response times" to companies; and instances where proxy advisers failed to correct inaccuracies in a report.
ASIC found that CGI Glass Lewis is the only adviser with a 'blackout' period for engagement, and ISS Australia is the only proxy adviser that provides pre-publication drafts to companies.
In its recommendations, ASIC encouraged proxy advisers to be more transparent in their reports about their engagement with companies who are the subject of their reports.
Proxy advisers should also consider disclosing the "nature, extent and outcome of engagement with the subject company", along with a summary of the company's view on a particular issue when that view differs from the proxy advisers, said ASIC.
"We encourage proxy advisers and companies to work together to ensure shareholders have accurate information to enable them to make informed voting decisions," said the report.
"Proxy advisers should note their obligations under s1041H [of the Corporations Act] and actively seek out confirmation of factual matters where some uncertainty or ambiguity exists. Similarly, companies should engage with proxy advisers to resolve any ambiguities or uncertainties," said ASIC.
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