In its submission to the Treasury earlier this year, the peak body said that while most of what is included in the proposed reforms are “uncontentious”, a requirement for proxy advisers to give companies five days’ notice of their recommendations before issuing a report to clients could have a “significant impact” on the current proxy voting processes of funds.
The FSC argued that the measure that requires proxy advisers to provide their report to a company five days before the recommendation is made public could affect members’ ability to implement proxy voting processes as well as fund managers who do proxy voting on behalf of their clients.
“Institutional investors do not typically execute their votes until near the cut-off date so that issuer companies have enough time (around 10 days) to provide additional feedback and information on the voting recommendations,” the report reads.
“Adding a five-day pre-notification period would risk making this process unachievable in the time available.
“Indeed, the AGM process involves a complex ‘proxy plumbing’ process involving share registries, custodians, sub-custodians, proxy advisers and voting agents to manage institutional voting, mostly at a very intense time of year for company management and investor relations teams.”
The FSC has recommended that a publicly available policy that outlines how a proxy adviser engages with companies ahead of publishing be available which also allows companies to address any specific concerns, and that the five-day pre-notification be removed “given the likely impacts on scheme operators in conducting their shareholder obligations”.
“Instead, we recommend Treasury adopt the simultaneous access approach of the [Securities and Exchange Commission] SEC and are supportive of further disclosure by proxy advisers on the quantum of engagement, factual accuracy and verification status of the research and recommendations,” the report continues.
“We also support the proposal to make any responses or clarifications by companies to proxy research available to users.”
