Stay current on changes and developments in corporate law with a wide variety of resources and tools.
By Michael Greene
Jan. 8 — Speakers at a Jan. 7 U.S. Chamber of Commerce event debated the influence of proxy advisers and whether more should be done to increase their transparency.
Robert Coury, executive chairman of Mylan Inc., said it is undisputed that proxy advisers have a disproportionate influence on the outcome of elections and lack transparency. Accordingly, he said that the playing field needs to be leveled so that proxy advisory firms are observing the same rules as everyone else when it comes to disclosures.
However, Robert McCormick, chief policy officer of Glass Lewis & Co. LLC, which with Institutional Shareholder Services Inc. controls 97 percent of the proxy advisory services market, said there is no clear consensus about how much influence proxy advisers have. He said there also is a lot of misperception that proxy advisers use a “one size fits all” approach in making recommendations.
He added that advocates for more proxy adviser disclosures must consider that the firms' clients are not required to hire them and that the services the firms provide exist to empower their clients with more information.
The chamber's Center for Capital Markets Competitiveness hosted the event in Washington, during which other speakers addressed the Securities and Exchange Commission's recent guidance clarifying proxy advisers' obligatory disclosures.
In terms of transparency, McCormick said there is not much more Glass Lewis can disclose other than its proprietary information. He said that his firm engages with its clients, posts its guidelines on its website and describes its methodology.
He also added that his company engages in constructive dialogue with lots of companies and that transparency with issuers enhances Glass Lewis' ability to examine companies more broadly.
In addressing concerns regarding his firm's influence over proxy votes, he stated that investors have different values and that clients make up their own minds, noting that they use Glass Lewis' services to receive another perspective.
He added that his company has robust procedures for correcting errors in the information that it provides because its recommendations are often not as important to their clients.
Coury said that issuers, institutional investors and proxy advisers all need to be open to more dialogue.
He said that executives and issuers need to realize that telling their story in the proxy material is not enough. “A proxy alone is a monologue, it is not a dialogue.”
However, with this in mind, he noted that institutional investors that rely on proxy advisers for recommendations should allow issuers to tell their side of the story.
Otherwise, this creates an unfair election where there is not equal access, he said.
Although Coury noted that the SEC's guidance was a first step in leveling the playing field, he believes that everyone should be playing by the same rules when it comes to disclosure.
Proxy advisers provide a service that is needed, he said, but they need to provide more transparency and become more accessible to issuers.
He noted that investors and proxy advisers often do not have all the information they need to make informed decisions and that sometimes institutional investors pawn off their responsibilities to proxy advisers.
McCormick responded that many investors do not have a problem with proxy advisers and that much of the criticism relates to how investors make their decisions, not with proxy adviser policies.
“The market is the ultimate supervisor. If somebody doesn't like a proxy adviser they can hire someone else,” he said.
To contact the reporter on this story: Michael Greene in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan Tuck at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)