Addressing the Stockbrokers and Financial Advisers Association 2021 Conference, shadow financial services minister Stephen Jones said the proposed reforms were symptomatic of the “dangerous trends emerging from the government towards secrecy and against transparency that can be seen across a range of different corporate reforms”.
“Their plan is to oblige proxy advisers to let company directors get an early preview of reports that customers pay tens of thousands of dollars for and that provide investors with a clearer view of what companies are planning,” Mr Jones said.
“This would be like requiring the AFR to give away free copies of their paper every night before they’re printed, or obliging lawyers to share confidence on a commercial transaction with counterparties. The advisory services say it will destroy their business model, and it’s hard to draw any other conclusion than this is the government’s intention.”
Mr Jones pointed to data collected by institutional proxy advice group Ownership Matters that just a tiny fraction of company resolutions were voted against each year, dispelling any rationale for the new laws on the basis that proxy advisers were awarded a disproportionate amount of power in the market.
“In the decade that Ownership Matters has been offering proxy advice services, more than 17,300 resolutions were put to companies, and about 350 resolutions failed. That’s about 2 per cent,” he said.
“The most common type to fail, accounting for almost half, were votes on remuneration, and resolutions to appoint directors by contrast failed six times or less than 0.08 per cent.
“ASIC research on proxy advice reports has also shown that negative recommendations are produced for about 3 per cent of total resolutions, and even when a negative report is produced, the investor who procured the report doesn’t always follow the vote the way they’re advised.
“The question is what is the government trying to solve by cracking down on proxy advisers and driving them out of business, where is the evidence that they have a high influence in the outcomes of company resolutions? There isn’t evidence because it doesn’t exist.”
Mr Jones suggested the government’s motive could be based more on self-interest, with proxy advice reports having recently helped identify the embarrassing extent of JobKeeper rorts among more than 30 listed companies that delivered a healthy profit during the COVID crisis.
“Those 34 companies didn’t break any rule, the problem is the Prime Minister and government designed JobKeeper to allow them to get that money and keep it,” he said.
“We can understand [that] a board may feel discomfort when their recommendations are brought into question, but it’s a different thing entirely for the government to take their side. A government obsessed with square-ups can never put national interest first because it can’t see beyond short sightedness.”