Australian investors hit out at planned proxy rules

14 May, 2021

A proposed Australian government clampdown on proxy advice provision risks limiting the ability of investors to raise issues with corporate boards, investor groups have warned.

The rule changes, put forward by Australia’s federal treasurer Josh Frydenberg, would force proxy advice firms to make their non-binding voting advice and research available to companies five days ahead of providing it to clients who pay for the service.

Additionally, the rule changes would force proxy advice firms to be independent of pension (superannuation) funds, in a move to reduce perceived conflicts of interest between proxy advisers and their clients.

These rule changes particularly affect the Australian Council of Superannuation Investors (ACSI), a membership organisation for asset owners that also provides proxy voting services who have heavily criticised the proposed rules.

ACSI, has spoken out against the proposed rule changes, which are currently going through a phase of public consultation.

The new rules have also been criticised for being founded on a misguided notion that the proxy voting sector lacks transparency. In fact, the rule changes would undermine the rights of asset owners to vote as they wish and give undue influence to the companies. Advisers are concerned the proposed five-day early disclosure to companies will reduce voting independence.

Similar proxy rule changes have previously gone ahead in the United States, where the Securities and Exchange Commission faced backlash from investors and proxy advisers in 2020.

Minerva, as a founder member of the Best Practice Principles for Shareholder Voting Research intends to submit a response to the consultation.

Commenting on the proposals, Minerva CEO, Sarah Wilson said: "It is disappointing that, once again, regulators are giving undue weight to the ill-informed views of a handful of powerful individuals who seek to avoid investor oversight and accountability. These proposals are an extraordinary and authoritarian attack on basic property and establishment rights. No other part of the independent financial research community has been subject to such evidence-free witch-hunts. We only have to look at the effect of issuer influence over the credit rating agencies to understand that research independence and objectivity is something the markets need and should cherish."