Issuers should disclose consulting contracts with proxy advisors

9 October 2009

Sarah Wilson

EU regulation

Leading US mutual fund manager Oppenheimer Funds has written to the SEC supporting improved disclosure of commercial relationships which might create a conflict of interest.

In a Sept.24 letter to the Securities and Exchange Commission commenting on the SEC’s proposed new rules entitled “Proxy Disclosure and Solicitation Enhancements,” OppenheimerFunds said it supports the Commission’s efforts to “enhance transparency to investors around the use of compensation consultants by publicly-held corporate issuers” and calls for greater disclosure of compensation-related consulting by proxy advisory firms. The investment advisor notes that, in its release, the Commission discusses a number of potential conflicts-of-interest that can occur if compensation consultants provide ancillary services to corporations. “We feel that there may be a potential conflict-of-interest if a proxy advisory service that provides analyses and voting recommendations to institutional investors on executive and director compensation proposals as well as the re-election of board members serving on an issuer’s compensation committee also provides consulting services to that same issuer on compensation or other corporate governance matters,” OppenheimerFunds says.

Noting that various rules being proposed by the SEC “could result in closer votes on director elections or contentious proposals,” OppenheimerFunds states that the SEC “should require corporate issuers to publicly disclose in sufficient detail any consulting services they received from a proxy advisory service under the Compensation Discussion and Analysis section of their proxy statements” and that such a transparency and disclosure approach is preferable to an outright ban on proxy advisory firms providing consulting services to issuers. 

For more information about this story please Scott Fenn at ProxyGovernance Inc +1 703 245 5800

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