Ineffective meetings and proxy voting surprises could be sharply reduced in Australia, say a group of investors, companies and proxy advisers that has published a new set of engagement guidelines.
The group of more than 40 company representatives, investment managers, governance experts, board members and consultants has submitted for public comment a dozen dos and don’ts that they hope will serve as a best practice guide for shareholder relations.
‘The draft guidelines reflect a consensus that both sides would benefit from a best practice code that establishes clearer lines of communication, promotes greater transparency in governance-related decision-making and sets a course for a more productive relationship,’ the Governance Institute of Australia, which coordinated the draft, says in a press release.
Five guidelines are directed at institutional investors, including suggestions that they explain how they vote their stock, explain their proxy voting and governance guidelines, disclose who in the firm is responsible for voting, inform companies if the super fund or the fund manager is responsible for engagement, and ‘understand the companies in which you invest.’
The four aimed at ASX-listed companies suggest they explain who in the organization is responsible for engagement and on what issues. They also call on companies to seek to understand the role of proxy advisors on voting decisions and to ‘understand your significant institutional investors at fund manager and super fund level.’
In addition, the guidelines call on both investors and issuers to time engagements to avoid peak periods, such as the AGM season, and to maintain ‘a regular, meaningful and mutually beneficial engagement program.’
‘We recommend that institutional investors disclose on their websites who has voting power over what issues,’ Sandy Easterbrook, the founder of Australia’s first proxy advisory firm, which is now called CGI Glass Lewis, says in the statement.
‘We also suggest that investors be upfront with their policies on proxy voting and the governance guidelines used to judge whether a company’s actions are appropriate. Investors have an obligation to let companies know in advance what their hot buttons are,’ says Easterbrook, who helped draft the guidelines.
The guidelines were jointly drafted by representatives from the Australasian Investor Relations Association, proxy advisory firms ISS and Glass Lewis and the chief executive officers or chairmen of Coca-Cola Amatil, Wesfarmers, Cochlear and other firms.
Institutional investors with representatives on the drafting committee include BlackRock, JANA Investment Advisers and Colonial First State Global Asset Management.
