Anyone who pays attention to corporate proxy season each year — and maybe even reads a proxy statement or two — knows the role advisory firms play in influencing the final vote in many corporate proxies. These proxy advisory firms advise their clients on how to vote their shares on issues as mundane as auditor approval and as contentious as executive compensation. Some critics of proxy advisory firms feel that, at best, these firms have an unfair influence over the votes of shareowners they advise and, at worst, are subject to significant conflicts of interests as they do business with both issuers and investors.
Critics and champions alike should therefore welcome the chance to comment on the 2012 draft proxy voting policies of International Shareholder Services (ISS), the largest and arguably most influential proxy advisory firm in the world.
ISS has put its standard-issue proxy voting policies (basic service level) out for public consultation this year. This basic service level is the product that most small-and intermediate-size institutional funds buy in order to obtain proxy advice. Bigger institutional funds have their own customized set of standards they ask ISS to execute on — and often end up voting contrary to ISS’ recommendations. The complaints about undo ISS influence in proxy voting, however, are mostly related to smaller firms that more closely follow these basic service level recommendations.
The comment period for the ISS 2012 global draft proxy voting policies closes Monday, 31 October. Therefore, anyone claiming proxy advisers hold too much sway over the proxy voting process now has a chance to influence the influencers, and to put it in writing for the whole world to see. If you value transparency don’t be afraid to make your voice heard.