When ICSA and the FT surveyed opinions for the latest Boardroom
Bellwether survey published in May, companies were asked: how do
you perceive the influence of proxy advisers on shareholder
Only 3% of respondents felt they had a positive impact. Can
proxy advisers really be doing as bad a job as this survey
This industry has become important because many institutional
investors these days invest in thousands of companies across many
Each of these companies will hold an AGM at which resolutions
are tabled on which shareholders are asked to vote. Factor in
the fact that the majority of AGMs take place in a concentrated
period, and it is obvious that investors cannot meaningfully assess
each and every resolution on its merits before deciding how to
Investors need a process that enables them to sift through all
these resolutions and identify which are uncontentious and which
require them to carry out a more detailed assessment. This is
the role proxy advisers perform, and for investors it makes sense
to use their services as a means of reducing costs.
But as it is driven by a desire to cut costs, it is no surprise
that advisers have had to adopt relatively low-cost business
models, which of course will have an impact on the quality of
analysis they can undertake.
More contentiously, some investors also contract out their
thinking to proxy advisers. Investors choose to delegate the
authority for deciding how to vote to the adviser, signing up to a
standard voting policy that they want to be applied to their
This is the source of the 'box-ticking' charge from
companies, who are concerned that this has an impact on both the
results of voting and the quality of engagement.
Despite the public profile enjoyed by some of them, I have yet
to come across compelling evidence that the recommendations of
proxy advisers have a negative impact on voting results to any
In 2015 the average vote against resolutions at FTSE 350 AGMs
was less than 3%, which hardly suggests there is a systemic
problem. There is, however, a huge amount of irritation
generated by the activities of proxy advisers.
Many companies feel that they are being judged against some sort
of standard template and that little attempt is being made to take
account of their particular circumstances, no matter how much
effort they have made to communicate and engage with their
shareholders – so of course they will be frustrated.
But where do you lay the blame? At the proxy advisers? Or at
their clients – the company's shareholders – who
have delegated this activity rather than taken responsibility for
it themselves, and are only willing to devote limited time and
money to analysis and engagement?
In my view, the advisory firms are a symptom of the problem, not
the root cause. While the advisers are not immune from
criticism, what is really needed is a change of approach on behalf
of many of their clients and – to quote the UK Stewardship
Code – recognition that although they can outsource
activities, 'they cannot delegate their responsibility for
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