The power of proxy advisory firms over proxy voting decisions may be overstated, according to research by Proxy Insight.
Only about one in five institutional investors (20.6 percent) say they use the proxy voting policy of an advisory service such as Glass Lewis or ISS when voting their proxies, according to the results of a Proxy Insight survey of 1,086 investors.
The results also show that 70.9 percent of investors vote their proxies based on their own corporate voting policies, and a further 8.5 percent delegate the voting decisions to a sub-manager or another asset manager, Proxy Insight says.
While most investors rely on their own voting policies, almost half (47 percent) of the survey respondents use the services of at least one proxy advisory firm, mainly for research or for recommendations for voting that they can then adapt to their own policies, the survey shows.
‘We are pleased to present solid evidence around the exact nature of the influence of proxy voting advisers,’ says Nick Dawson, managing director of Proxy Insight, in an email entitled: Are proxy voting advisers really that powerful? He adds that proxy voting advisers ‘are a critical part of the plumbing of the voting process but the final decision typically lies with the investor.’
The power of proxy advisers has been widely questioned in recent years, particularly in the US, with increasing calls to regulate the sector. In August the world’s largest sovereign wealth fund, Norges Bank Investment Management, called on the European Securities and Markets Authority to regulate the proxy advisory industry, pointing out that self-regulation won’t eliminate conflicts of interest at firms that offer voting advice while selling services to both shareholders and issuers.
