Last summer, Liz blogged about the appointment of an independent oversight committee to monitor proxy advisor “best practices.” Last week, the oversight committee issued its first report with an assessment of the extent to which proxy advisory firms adhere to industry best practices. Along the lines of the familiar “exceeds performance expectations,” “meets expectations”, etc., the 61-page report generally says proxy advisors meet “best practices” relating to service quality, conflicts of interest avoidance and management and communications policy, but also includes suggestions for improvement.
Assessment of proxy advisor practices begins on page 52, and some of the areas for improvement include suggestions for improved proxy advisor disclosures relating to how they manage staff development and staff qualifications, professional staff length of service and information about staff workload. This excerpt touches on proxy advisor quality assurance:
The Committee would like to see more robust disclosures on such internal controls over quality, reliability, independence, and accuracy, including data on alerts to clients concerning errors or revisions. The Committee also sees the need for more expansive reporting on Guidance 1.3(e), which suggests assurance that each Signatory maintains “records of the sources of data used for the provision of services to clients”, and Guidance 1.3(g), which urges Signatories to be “transparent regarding the sources used and content included in the research information they provide to clients”.
For more information about the committee’s work, the report provides background about the committee’s mission, composition and principles and guidance relating to proxy advisor “best practices.” Going forward, the report says the committee intends to launch a survey of stakeholders to gather opinion on the proxy advisory firm industry and it plans to release survey results in October. The committee will then use information from the survey to help inform perspectives on whether to revise its proxy advisor “best practices” principles.
-Lynn Jokela, TheCorporateCounsel.net July 7, 2021