Sunday, December 15, 2013

Jay Brown on the Proxy Advisory Services Roundtable

Over at The Race to the Bottom, Jay Brown has compiled a series of post on the recent proxy advisory services roundtable.  Here are the relevant links:

  • Introduction ("To be frank … roundtables do not often move the issue forward.  Comments can be random or incomplete. In a room full of experts, they can be woefully unprepared and tendentious. Statements can be predictable and provide little additional value to the debate.  This Roundtable, however, was different. It was very well done.").
  • The Participants ("There was a good cross section of views to say the least.").
  • The Data ("[T]he evidence presented at the Roundtable indicated that the largest asset managers (BlackRock for example) viewed the recommendations as an input, not a controlling influence.").
  • Voting Decisions and the Need for Data Tagging ("Mutual funds must file voting data on Form N-PX…. [we should] require the filing of the data in an interactive format.").
  • The Issue of Concentration (“Concentration is … a structural issue that exists in many places in the securities markets and the proxy process.”).
  • Plumbing Problems (“Michelle Edkins from BlackRock … noted that BlackRock retained ISS not only for advice but for other services as well. Some of these services arose out of the ‘operating environment.’ She described the voting environment as ‘highly complex, terribly inefficient’ and ‘prone to error.’”).
  • The View of Consumers (“The discussion brought home several points.  First, investors want the services provided by the proxy advisory firms, an obvious enough point given that they pay for it.  But the comments demonstrated the role that demand played in the structure of the proxy process.”).
  • The View of Issuers (“Issuers and their allies raised a number of concerns about proxy advisory firms.  They ranged from industry concentration to conflicts of interest to the propensity to make mistakes in making recommendations.  The fact that the firms make recommendations yet seek business from issuers raised concerns, as Trevor Norwitz (2:37) said, about being 'shaken down when approached by the governance side . . .'”).
  • The Regulatory Privilege (“An interesting issue that arose off and on during the day was the role played by the Commission in connection with the use of proxy advisory firms and the creation of the current market structure.”).

Corporate Governance, Current Affairs, Financial Markets, Securities Regulation, Stefan J. Padfield | Permalink


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