Proxy advisers group launches consultation of best practice principles

11 October 2017

Editor

EU regulation

A consultation has been launched seeking views from investors and companies on whether the Best Practice Principles for Shareholder Voting Research and Analysis have been effective in ensuring the integrity and efficiency of the services provided by proxy advisers.

Earlier this year the charter signatories to the Best Practice Principles (the BPP group), which includes Manifest, announced a review of the principles and appointed Chris Hodge, formerly director of corporate governance at the UK’s Financial Reporting Council, as chairman of the BPP Group’s review steering committee.

The review will also consider what actions are needed to ensure the Principles are fully compatible with the mandatory requirements for proxy advisers operating in the European Union that are contained in the revised EU Shareholder Rights Directive, which takes effect in 2019.

The principles were first introduced in 2014 and were developed by the industry as a voluntary standard. The aim was to promote a greater understanding of the role of shareholder voting research providers and provide more transparency about their activities.

Hodge said: “The role of proxy advisors is a subject that can often generate more heat than light. This review is an opportunity to shed more light on their activities, and to identify ways in which the standards in the Principles might be strengthened and reporting against them made more informative. We are particularly keen to get first-hand evidence from investors who use the services of voting research providers and from companies who have had direct dealings with them”.

Questions covered in the consultation include asking about awareness of the principles; whether disclosure of proxy advisers' research methodologies are reliable; whether the principles should cover issues beyond the current areas of service quality (which includes duties to clients, research methodology and voting policy); managing conflicts of interest; and communications with issuers, the media and other stakeholders and whether the principles adequately manage any conflicts that may arise.

Along with Hodge, the steering committee is made up of representatives of the five current BPP signatories: Glass Lewis; Institutional Shareholder Services; Manifest; PIRC and Proxinvest. The steering group is supported by an advisory panel whose members have broad experience and knowledge of investors, companies and different national markets.

The consultation is open until 15 December 2017.

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