The New York Stock Exchange has called for an investigation into the role of proxy advisory firms.
Citing the “increased level of concern” about advisory firms, NYSE has called on the Securities and Exchange Commission to “engage in a study of the role of proxy advisory firms to determine their potential impact on, among other things, corporate governance and behaviour and consider whether or not further regulation of these firms is appropriate”.
NYSE wants, as a minimum requirement, for the firms to be required to disclose how they arrive at their voting recommendations and any material conflicts of interest. It also wants the firms to be required to disclose companies’ responses to their analysis.
The comments come in the final report by NYSE’s Commission on Corporate Governance, issued late last week, which suggests 10 broad principles of corporate governance.
The NYSE Commission notes that investors’ voting decisions influence directors’ behaviour, corporate governance and conduct – and that “voting decisions are one of the primary means of communicating with companies on issues of concern”.
“Consistent with this principle,” the NYSE report adds, “institutional investors should establish and disclose their corporate governance guidelines and general voting policies. These investors should also engage in dialogue with companies on their corporate governance and voting policies, processes and philosophy.”The Commission also argues that delegating to third party proxy services does not relieve institutions from discharging their responsibility to vote “constructively, thoughtfully and in alignment with the interests of their clients”.
“Investors should engage in dialogue with companies on their corporate governance and voting policies”
It asserts that shareholders should not be regarded as adversaries of a company. “Rather, all corporate constituencies should be encouraged toward a common goal of building companies that generate value over an extended period of time.”
NYSE set up the Commission in 2009 and by its own account had numerous “spirited discussions”. The report concludes that the group “found it difficult to reach consensus” on hot topics such as proxy access, financial regulatory reform, an expanded federal role in corporate governance, and the “proxy plumbing” initiatives.
The 27-strong panel included representatives from major corporations, market experts and institutions such as TIAA–CREF, Governance for Owners, Nuveen Investments, U.S. Steel & Carnegie Pension Fund, Morgan Stanley, CalPERS, Goldman Sachs and the Vanguard Group.