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Jul 24, 2019

Proxy advisers agree to greater independent scrutiny

Major proxy advisory firms sign up to revised principles

Big-hitting proxy advisers have agreed to greater independent scrutiny involving a series of updated principles and supervision from an independent committee set up to oversee businesses involved in shareholder voting.

KT Rabin, Glass Lewis CEO, tells IR Magazine: ‘As a founding signatory to the Best Practice Principles for Shareholder Voting Research and Analysis Group (BPP), launched in 2014, Glass Lewis is pleased to confirm that the revised BPP was updated on Monday, July 22.’

The BPP Group was set up to promote a better understanding of proxy advisers. Its committee comprises representatives from Glass Lewis, ISS, Minerva Analytics, PIRC and Proxinvest.

Rabin reveals that the revised principles are the result of a two-year review process, which took into account responses to a public consultation on the BPP, the new requirements for reporting as set out in the EU Shareholder Rights Directive, global stewardship principles and engagement with clients, regulatory bodies and other stakeholders.

‘We believe the independently reviewed BPP, with a new governance and oversight structure, sets a high industry benchmark for best practice for providers of shareholder voting analysis,’ adds Rabin. ‘We are delighted that the revised BPP emphasizes the important role providers of shareholder voting research play in supporting their clients’ stewardship efforts, while retaining a focus on the needs of those institutional investor clients.  

‘Under the guidance of Danielle Melis – the independent chair for the review of the BPP – we are confident the input of key stakeholders has been reflected in the revisions while recognizing that BPP signatories’ primary mission is to serve investors.’

Rabin adds that Glass Lewis will continue to update and improve its already extensive reporting against the BPP, as it has done since 2015, ‘to provide greater transparency to institutional investor clients, regulators and other key stakeholders on the issues that are of most importance to them. We believe the revised BPP, including an independent oversight mechanism, will ensure all signatories continue to improve the industry standard of reporting.’

The new BPP Oversight Committee will monitor whether companies are applying the principles, look at the public reporting of signatories and manage an open forum. The committee is made up of an independent chair and 11 members, consisting of both investor and issuer representatives, as well as independent members.

Under the updated principles, proxy advisers have to disclose the extent to which listed companies have been asked to review or comment on recommendations.

Melis adds: ‘The BPP Oversight Committee will help ensure providers are operating to the highest standards.’