Views on improving the integrity of global capital markets
04 November 2015

CorpGov Roundup: Proxy Access, Sustainable Investments, Seeking Comments

Usually my roundups reveal a scandal or two brewing, or gridlock due to a heated issue. But spanning the corp gov world in October, all seems right by investors.


In early October the Brazilian stock market, BM&FBOVESPA, published guidelines for the corporate governance of state-run companies. The State-Owned Enterprise Governance Program was created by the exchange’s regulation team to enhance practices regarding the provision of information and corporate governance structures of state-owned enterprises, seeking to restore investors’ confidence and reduce state-owned enterprises’ fund-raising costs.

According to the BM&FBOVESPA , the program is focused on four main measures:

  • Transparency: the disclosure of information lets investors know the objectives of the controlling state-owned enterprise. This makes the enterprise, and thus the investors’ risk exposure, predictable. The correct and appropriate disclosure of information allows implicit costs to be measured, and permits inspection of the management and controllers’ activities.
  • Internal controls: there must be the adoption of a functional control system that is capable of removing executives and board members that divert company activity away from the stated purpose to benefit public policies that go beyond the public interest remit foreseen in the legal authorization.
  • Board composition: there must be detailed nominations criteria encompassing the qualification and expertise of members of the board of directors and executive board, notably in relation to the state-owned enterprise’s strategic areas of activity.
  • Obligation of the public controlling shareholder: federal government bodies must demonstrate their commitment to corporate governance best practice.


The Canadian Coalition for Good Governance (CCGG) recently recommended that Canadian companies should adopt universal proxies in contested elections, and asked Canadian regulators to make universal proxies standard in contested elections.

By universal proxy the CCGG refers to a form of proxy that lists the names of all director nominees on a single form of proxy, regardless of whether they are nominated by the company or by dissidents.


Every fall, proxy adviser Institutional Shareowner Services (ISS) announces its voting policies for the coming year. This year the company has announced 16 new or amended voting policies including those covering: over-boarding (US, Canada, UK); board composition and poison pills (Japan); compensation-related votes at externally managed issuers with poor disclosure (US, Canada); nonindependent chairs of key committees (Hong Kong, Singapore); equity plan scorecard (Canada); vesting period for equity awards (France); ongoing withholds for unilateral board actions (US); audit fees for smaller companies and issuance of shares without pre-emptive rights (UK); acceptance of deposits from the public (India); director independence classification (Middle East and Africa); and remuneration caps (Brazil).

To solicit views on its proposed voting policy, ISS is holding an open comment period through 9 November.


Japan’s Financial Services Agency requested comments on the corporate governance issues its Council of Experts (named back in August) should address. There was no deadline specified, so it appears that the Council will be open to comments on the topic for the foreseeable future.

CFA Institute and CFA Society Japan crafted a joint comment letter to the Council with a focus on issues such as: voting at the annual general meeting, related-party transactions, transparency, the role of the board, structure of board committees, and engagement.


The Dutch pension fund ABP announced a new Responsible Investment Policy.

“ABP will be targeting the most sustainable and responsible investments, as well as investments that will have the potential of belonging to this category,” stated an ABP release. “We aim to fully integrate our sustainable and responsible investment objectives with the return objectives of the Fund. In years to come, this approach will lead to a fall in the number of investment types in the portfolio and to a better engagement with companies as we seek to enhance the degree of sustainability.”

The fund plans to cut about 1,500 companies from its portfolio of about 5,000 stocks now, in order to better focus on sustainable companies and be in a better position to engage with companies. The fund expects this will shift up to €30 of investment and cut its CO2-related investments by 25% over the same time period.

United States

The Division of Corporation Finance at the US Securities and Exchange Commission (SEC) recently issued guidance concerning the ability for companies to exclude shareowner proposals that a company feels conflict with its own proposals.

This issue came to a head last December when Whole Foods looked to head off a shareowner proposal for proxy access (investors holding 3% for three years could nominate directors) by proposing a company-sponsored proxy access proposal (investors holding 5% for five years could nominate directors) with a more stringent ownership threshold than the competing shareowner proposal. Originally the SEC allowed Whole Foods to exclude the shareowner proposal, but reversed course about a month later amid investor complaints. At that time, the SEC decided to remove itself from the fray, stating that it would not exclude any such “competing” proposals for the 2015 proxy season, and would review the rule.

The guidance we received last week says companies could only exclude similar proposals if “a reasonable shareholder could not logically vote in favor of both.”

This seems to clear the way for a true “contest of ideas” on proxy access and a number of other issues on the corporate proxy. Just this past proxy season, there were a handful of instances in which two competing proxy access proposals were voted on by shareowners on the same proxy ballot. In some cases the shareowner proposal received more votes, in some cases the corporate proposal received more votes. In each case shareowners were able to pick the competing idea they liked best.

What a concept.

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About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a director of capital markets policy at CFA Institute, where he focuses on corporate governance issues. He was named one of the 2008 “Rising Stars of Corporate Governance” by the Millstein Center for Corporate Governance and Performance at the Yale School of Management.

2 thoughts on “CorpGov Roundup: Proxy Access, Sustainable Investments, Seeking Comments”

  1. Choice isn’t something that confuses shareowners. That fact was finally recognized by the SEC in Staff Legal Bulletin No. 14H (CF). Maybe someday we will also have choices between director candidates on the corporate proxy.

    1. Matt Orsagh, CFA, CIPM says:

      Thank you for your comment Jim,

      It will indeed be interesting to see if we see more competing proposals in the coming years that give investors choices on a number of issues.


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