ISS wary of disclosing voting recommendations

Proxy voting firm fears disclosure would “distort” its role

Institutional Shareholder Services, the US-based proxy voting firm that’s now part of MSCI, is resisting suggestions that it disclose its voting recommendations – saying it would “distort” its role.
The UK’s new Stewardship Code encourages proxy firms to “disclose how they have carried out the wishes of their clients by applying the principles of the Code that are relevant to their activities”. There are suggestions that this could mean proxy firms disclosing their voting recommendations.
“While disclosure of recommendations may be appropriate for proxy advisors who produce a single recommendation on behalf of all clients, our sense is that for ISS to do so would distort rather than clarify the understanding of our role and would not be representative of our service or our client base,” the firm says. It adds that the ultimate voting decision is the responsibility of the client.
Instead of disclosing its voting recommendations it will continue to release aggregate voting trends reports. “We will of course keep this position under review and look at alternative ways of serving the goals of the Code in this area,” ISS says.The stance highlights the different approaches to the UK Stewardship Code taken by proxy advisors. French company, Proxinvest, for example, in its submission to the consultation on the code, argues that the Code should not apply to the “crowd of investment consultants and proxy research providers”. It says the duty of care rests with institutional investors.
On the other hand, UK-based, PIRC, has long been an advocate of mandatory voting disclosure and makes it own voting recommendations publicly available.
ISS has become one of the first companies to respond to the Financial Reporting Council’s request that industry players post on their website how they comply with the Stewardship Code. The disclosure was put together by Rob Dinning, Head of International Research and Jean-Nicolas Caprasse, Head of Governance Business, Europe, Middle East and Africa.
ISS adds that it has already engaged with 50% more companies than at the same stage last year. ISS points out a “little-acknowledged fact” that it provides custom analysis for more than half of its clients’ assets.