The proxy advisory industry established the Best Practice Principles for Shareholder Voting Research in 2014 and the Independent Oversight Committee in 2020. While the BPP Group is made of ISS, Glass Lewis, and other proxy advisory firms, the committee is comprised of international representatives of public companies, investors, and the academic community.
The committee has issued its
first annual report reviewing the signatories’ compliance statements and issuing recommendations for improved practices and disclosures (starting on page 52).
- The report called on proxy advisors to make it more clear how analyst teams are organized. By country/market? By industry? How does a firm ensure that analysts have sufficient expertise to produce the highest quality reports? The committee strongly encouraged firms to disclose how they assess staff qualifications.
- The report encouraged firms to disclose data and explanations on fact-checking and error-tracking together with remediation practices as well as explain internal controls over quality, reliability, independence, and accuracy, including data on alerts to clients concerning errors or revisions.
- Glass Lewis was highlighted for taking some initial steps in this direction, including tracking exchanges with issuers and error/correction rates.
- The committee encouraged proxy advisory firms to have a method that provides for timely issuer feedback and advised firms to provide clear explanations and instructions for corporate feedback, or to disclose why it is electing to not do so.
- Glass Lewis and PIRC (a smaller firm) were noted for providing comment windows prior to publication.
Notably, ISS, by far the largest proxy advisory firm, was not frequently highlighted for its adherence to the Best Practice Principles. As previously discussed, ISS eliminated its pre-publication review for S&P 500 companies and continues to keep error/correction rates private.
