In a letter to Treasury, Vanguard Australia head of advocacy and strategy Paul Murphy said the requirement for proxy advisers to provide their reports to companies five days ahead of releasing them to subscribers – one of several options proposed in the government’s consultation – had “adverse implications” for the quality of the advice.
“Our concerns regarding this option primarily relate to its adverse implications for the timeliness and quality of proxy advice in the extremely tight time period between the issuance of a notice of meeting and the record date by which voting instructions need to be lodged, via the complex chain of intermediaries and agents involved in the proxy voting process,” Mr Murphy said.
“They also reflect our views about the practical utility of the mooted pre-vetting process, and the availability of other avenues for companies to take action in cases where they believe that factual errors – as opposed to mere disagreements with issuer companies’ views – have been made in proxy adviser reports.”
Mr Murphy pointed to similar proposals in the US that were scrapped late last year after being opposed by major asset management bodies, including the Council of Institutional Investors and the Investment Company Institute.
In the US Securities and Exchange Commission’s final guidance on the changes, the regulator said a “substantial” number of industry submissions had slammed the proposals for conferring an unfair advantage on company management when it came to shareholder votes, compromising the independence of advice given to investors and increasing the risk of insider trading.
The final version of the proposals instead contained the requirement for proxy advisers to provide reports to companies and subscribers at the same time. Vanguard said it had contributed to industry body submissions in opposition to the changes and believed “that the same substantive comments apply to the equivalent measure being considered in Australia”.
Political and industry opposition to the proposed reforms has so far chiefly centred on the proposal around providing proxy advice reports in advance, with the $600 billion Dimensional Fund Advisors also suggesting the option would be costly and compromising towards proxy advice firms.
Labor financial services spokesman Stephen Jones has also blasted the plan as amounting to the destruction of proxy advice, indicating the government may have a fight on its hands if the proposal were to reach the legislative stage.