Views on improving the integrity of global capital markets
06 July 2016

CorpGov Roundup: Is US Proxy Advisory Industry under Attack?

Under the guise of protecting investors, a new bill may impose unnecessary regulation on the proxy advisory industry in the United States. France is close to implementing a binding say-on-pay standard. Brazil has taken steps to promote a stewardship culture, and corporate governance in Japan is showing significant improvement.


A recent report by the Australian Centre for Corporate Responsibility (ACCR) addressed the issue of Corporate Political Expenditure in Australia. The report concludes that

. . . in Australia, for substantial sums of money across many companies it is impossible to tell the full amount of political expenditure or the extent to which the expenditure reflects the personal whim or short-term interests of boards or genuinely advances long-term shareholder interests. It is also impossible to tell how much these contributions actually influence Australian politics. However, analysis and examples considered in this report raise reasonable concern about the corrupting potential of corporate political expenditure in Australian politics. Comparisons with [the] US and the UK highlight these concerns.

The report coincides with an ACCR initiative to begin placing shareholder resolutions concerning political spending on the upcoming proxy ballots of Australian Issuers.


AMEC, the association for capital market investors in Brazil, has released a draft stewardship code to help promote a stewardship culture in Brazil. The goal is to promote a proprietary attitude among institutional investors and create responsible engagement standards.

If the code is adopted, it would join the growing number of stewardship codes currently in use by other countries, such as the United Kingdom, Japan, and Malaysia.

Comments are due by 15 July.


According to Jiang Yang, vice chair of the China Securities Regulatory Commission, China plans to adopt more stringent information disclosure and improved corporate governance for companies listed on China’s domestic A-share market. The goal is to better protect investors and curb speculation in the stock market by strengthening regulator supervision of public companies’ activities related to their shareholders.


Binding say on pay may be coming to France. A recent bill was passed in June by the French Parliament that will allow investors to give shareholders a binding vote on executive pay. The French Senate will vote on the bill in July.

The bill will allow shareholders to vote on the pay of incoming CEO’s and when compensation packages change, as well as vote on the variable portion of executive pay.


A recent report by the Tokyo Stock Exchange (TSE) indicates that corporate governance in Japan is improving. According to the report, nearly 78% of TSE companies in the first section of the TSE (1,958 companies) have at least two independent directors, up from less than 50% a year ago. In addition, 98.5%  of first section companies have outside directors on their boards versus only 51% just five years ago. These significant increases show that companies are moving to comply with the countries corporate governance code.

United States

Proxy advisers seem to be under attack in the United States. The US House of Representatives Committee on Financial Services drafted a bill (HR 5311) aimed at improving the quality of proxy advisory firms. The stated reason for the bill is to better protect investors and the US economy by fostering accountability, transparency, responsiveness, and competition in the proxy advisory firm industry.

Critics of the bill, however, see it as a sly attempt to hobble the proxy advisory industry by creating more regulation and imposing procedural delays on its research as well as imposing new costs on proxy advisers. The Council of Institutional Investors and the International Corporate Governance Network have both released letters condemning the bill on the grounds that it would ultimately harm investors by hampering the work of proxy advisers whose work helps inform the voting and policy decisions of many investors.

The language of the bill itself advocates for a layer of further regulation on proxy advisers that is unnecessary. It also introduces a requirement that proxy advisers grant issuers more ability to review and challenge a report’s findings, which is a level of oversight not even afforded to issuers concerning disagreements with bond rating agencies. It should also be noted that the reports are written for the paying customers of the proxy advisers, and that an attempt to insert the need for issuer approval into the process appears to be a bold attempt to allow issuers to delay reports that they may not agree with.

Finally, leading global proxy research firms subscribe to best practice principles developed at the prompting of the European Securities and Markets Authority and these principles already address most of the stated concerns of HR 5311. Feel free to write your congressman or congresswoman after studying the issue yourself.

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

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

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