ISS says Australian Treasury consultation “premised on a misguided notion”, argues against five-day comment period for companies.
Proposed reforms to proxy voting processes used by Australian superannuation funds have been criticised as “a solution in search of a problem”, by corporate governance and proxy voting solutions provider ISS.
A consultation launched by the Australian Treasury on the transparency of proxy advice asks for comment on a series of proposals, including one designed to increase superannuation funds’ disclosure of trustee voting and another to bolster the governance and independence of proxy advisors, relating both to clients and listed companies.
ISS, one of four major providers of proxy voting and related services in the Australian market, said the consultation “seems to be premised on a misguided notion”, arguing that the sector already maintains high standards of transparency, quality and independence when compiling proxy research reports and engaging with companies.
“Asset owners and other institutional investors should have the fundamental right to choose proxy advisers, use independent research and implement voting policies appropriate to their individual stewardship needs without any limitations placed on them by the companies which they own and directors who they elect,” said Vas Kolesnikoff, Head of Australia & New Zealand Research at ISS.
Other providers include CGI Glass Lewis, Ownership Matters and the Australian Council of Superannuation Investors.
The consultation includes a proposal requiring proxy advisors to allow companies a five-day comment period before reports about them are made available to superannuation funds and other clients. ISS said the proposal is an “unwarranted and inappropriate intrusion” on research independence. Further, the firm said the comment period would impede timely and effective stewardship and voting by asset owners.
“We firmly believe all institutional investors should have an unfettered right to receive independent advice on their portfolio companies, a practice that would be harmed should Treasury push through these potential proposals,” added Kolesnikoff.
The consultation was issued on 30 April and runs until 1 June. It is aimed at examining the adequacy of the current regulatory frameworks and developing reforms to “strengthen the transparency and accountability of proxy advice”.
In particular, the consultation seeks feedback on regulatory options to ensure independence between superannuation funds and proxy advice, facilitate engagement between advisers and companies, and reform the licensing of proxy advice provision.
Announcing the consultation, Treasurer Josh Frydenberg and Minister for Superannuation and Financial Services Jane Hume said current regulation of the provision and use of proxy advice was limited in scope.
As well as proposing mandatory Australian Financial Services Licences for advisers, the consultation asks for feedback on whether superannuation funds should publish their voting records, which would allow transparency on the impact on their voting decisions of proxy advice.
Read more articles like this on Regulation Asia’s sister publication, ESG Investor.