The influence exerted by proxy advisers on voting outcomes is ‘overstated’ and correlation between proxy recommendations and vote outcomes is often because voters and advisers assess votes using the same criteria, according to proxy advisory firm Glass Lewis.
‘The extent to which advisers influence voting outcome is overstated,’ Glass Lewis says. ‘More than 80 percent of Glass Lewis’ 900 clients – including the majority of the world’s largest public pension funds, asset managers and mutual funds – vote according to a custom policy or via a custom process for reaching vote decisions [that] often result in votes in line with Glass Lewis’ recommendations for the same or different reasons.’
Glass Lewis wrote the paper last week in response to a series of questions by the European Securities and Markets Authority (ESMA). Earlier this year, ESMA launched a study aimed at providing an overview of the proxy advisory industry, assessing its influence on voting and coming up with possible policy suggestions. ESMA said it would use the responses from proxy advisory firms to issue a statement in the fourth quarter of 2012.
In response to a question about how proxy advisory firms prepare their vote recommendations, Glass Lewis says it uses only public information already available to all investors, and meetings with representatives of the companies covered are governed by a series of strict rules as to timing and content.
‘When Glass Lewis analysts require clarification on a particular issue, they will reach out to companies but otherwise generally refrain from meeting with companies during the solicitation period, which is marked as being from the date a notice of meeting is released to the date of the meeting itself,’ Glass Lewis writes.
‘Glass Lewis is open to meeting with companies outside the solicitation period and the proxy season blackout periods, during which time the company can discuss Glass Lewis’ guidelines, research methodologies and perspectives.’
The firm also says a recent study showed that some of its clients adopt Glass Lewis policies as their own ‘after significant analysis and consideration’ while most clients use Glass Lewis recommendations as a ‘point of reference’.
In an overview of the proxy advisory industry to address ESMA’s queries, Glass Lewis says shareholder engagement has increased ‘dramatically’ in recent years and predicts it will continue to rise. It says engagement in North America ‒ which has traditionally lagged Europe ‒ Australia and Asia-Pacific is now increasing at a faster pace.
