The global proxy advisory industry has evolved considerably over the last 25 years, with proxy advisers growing in influence and many are increasingly questioning their mounting power in setting the governance agenda, according to the latest Corporate Governance Report prepared by AMP Capital Investors.
The 2010 Full Year Report examines the role and influence of proxy advisers, at a time when corporate governance is being more heavily scrutinised.
Referring to the Report, AMP Capital Investors Director of Sustainable Funds, Michael Anderson acknowledges that the importance of proxy voting is underpinned by the fact that for many shareholders proxy voting is the only way to communicate with the public companies in which they invest.
“Australian shareholders have differing approaches to proxy voting ranging from a detailed hands-on approach to those having insufficient resources to analyse in depth. Especially in the latter situation, proxy advisers have the potential to put investors in a better informed position on important issues such as board composition, executive pay and company-changing transactions.”
While proxy advisers research and recommendations may be useful to investors, advisers are sometimes criticised for the quality of their research and immense power and influence, although AMP Capital believes conflicts of interest are rare.
“Australian proxy research is of a high standard, and continues to improve. Australian advisers do not generally provide corporate advice to the companies they report on so there is less likelihood of conflicts of interest. Provided the research is used thoughtfully, investors are often better off with the additional advice from proxy advisers,” Mr Anderson said.
In Australia the two main providers of proxy advice are ISS (Riskmetrics) and CGI-Glass Lewis. A large number of Australian institutions subscribe to the services of either, or both of these.
The Corporate Governance Report, which is released twice a year, provides a summary of AMP Capital’s corporate governance activity. AMP Capital takes seriously its responsibilities as an investment manager, as an agent of shareholders in companies and as a steward of its clients’ assets. The latest Report includes an analysis of the 2010 proxy season and reviews proxy voting and corporate governance issues.
