Proxy advisors Glass Lewis, ISS, Minerva, PIRC, EOS at Federated Hermes, and Proxinvest were determined by a 12-member Independent Oversight Committee (IOC) to have complied with best practice industry standards for service quality, conflicts of interest avoidance or management, and communications, according to the inaugural IOC report released last week. The report includes examples of best practices (vis-à-vis the Best Practice Principles for Providers of Shareholder Voting Research & Analysis (BPP) and associated guidance) from the six firms’ compliance statements, along with recommendations for improved practices and disclosure.
Notably, citing PIRC as an example, the IOC indicates that it favors the proxy advisory firms providing companies a “timely” opportunity to review and correct factual descriptions and data included in their draft proxy reports to promote accuracy (see observations and recommendations regarding Principle 1: Service Quality (1.A.8 Company feedback ) and Principle 3: Communications Policy (3.A.2 Communications with issuers):
Notable disclosures from 2020 compliance reports are as follows. Proxinvest explained in detail why it decided to cease the issuer feedback process and why it no longer included company comments on its voting recommendations in the analysis report. PIRC stated that it aims to provide companies with a 24–48-hour response window. Where companies suggest any amendments to be incorporated into PIRC’s draft report, the firm said they will only be considered when provided via a written response and when received in a timely manner. Glass Lewis reported that it gives public companies 48 hours to review data and provide suggested updates, pointing to any public documentation which supports noted corrections.
ISS notes in its compliance statement: “Any corporate issuer may request a copy of the ISS report on its own shareholder meeting after it has been published to ISS clients, and there is no charge for this. There is no automatic entitlement to review research reports prior to publication, but draft reports are provided in certain markets.”
Glass Lewis’s new or more prominent Feedback and Complaints Center appears responsive to the BPP’s recommendation that all firms bolster discussion of their complaints procedures in this year’s compliance statements.
According to the release, the IOC plans to conduct a survey on stakeholder views of the proxy voting research and advisory industry. The results, which are planned to be released at a virtual open forum this fall, will reportedly inform its views about whether the BPP, which was adopted in 2019, should be updated.
See “Proxy advisors’ independent oversight body ‘favours’ giving companies ‘opportunity to review and correct’ research” (Responsible Investor), “Proxy firms doing well on best practices, with room to improve – report” (Pensions & Investments), and additional resources on our Proxy Advisors page >> Best Practices Principles Group.
This post first appeared in the weekly Society Alert!