Research spotlights links between directors, shareholders and proxy advisers
- Date:12 Oct 2011
- Type:Media Release
The links and engagement between directors, institutional shareholders and proxy advisers are explored in a new study launched by the Australian Institute of Company Directors.
The Institutional Share Voting and Engagement research report, conducted by Mercer for Company Directors, delves into the current connections between directors and institutional shareholders, the role and influence of proxy advisers, and issues faced by all participants during the corporate AGM season.
The independent research, the first of its kind conducted in Australia, found that directors and institutional shareholders want companies to create shareholder value, aligning their interests and creating mutual goodwill.
However, some of that goodwill is often lost due to an ongoing “failure to communicate” between all sides, as directors and institutional investors are frequently not talking to the right people or at the right time.
While the report showed that the evolving relationship between companies and proxy advisory firms is becoming less adversarial and more professional, it found a consensus among company directors, managed funds and superannuation funds that the “proxy adviser as decision-maker” model is undesirable.
“Directors, managed funds and super funds all agree that proxy advisers are influential,” said John Colvin, Chief Executive Officer of the Australian Institute of Company Directors.
“Our research found that superannuation funds and managed funds view proxy advisory advice as just one input among others in their decision making on voting.”
“However, a number of company directors believe that, because many institutional investors are outsourcing their analysis of companies to proxy advisers due to their own resource constraints, the advisers are too influential and have become de facto decision makers.”
“There is also some concern about the adequacy of resources and expertise being brought to bear by proxy advisers, given the power they hold.”
The research also examined views on the new executive remuneration legislation, finding that managed funds, company boards and proxy advisors believed the ‘two strikes’ approach to be flawed and problematic at best.
All of the participants expressed concerns about the new regulatory approach, saying that it was open to possible manipulation, that the 25 per cent threshold was too low and that the same ends could be achieved through existing shareholder vote provisions.
“The view widely shared across participant groups was that there had been too much focus on remuneration rather than broader governance and strategic issues. This issue, while important, diverted attention away from matters of more significance for shareholder value,” Mr Colvin said.
“The key messages from the research are that there is a strong willingness to engage by all parties in the voting process and that institutional shareholders and directors want to create value for shareholders - so their interests are aligned.”
“We hope the research will be a catalyst for constructive discussion between everyone involved.”
Download the above media release: Research spotlights links between directors, shareholders and proxy advisers (PDF, 116KB)
Download the full report: Institutional Share Voting and Engagement: Exploring the Links Between Directors, Institutional Shareholders And Proxy Advisers (PDF, 2,932KB)
View our other research reports reports here.
For further details, please contact: Ian Zakon, Media and Government Relations Advisor,
(02) 8248 2786, izakon@companydirectors.com.au