Voting systems are becoming more important as interest in environmental, social and governance (ESG) issues and how investors vote on relevant shareholder proposals increases. Institutional Shareholder Services (ISS)) and glass lewis, provides particularly important guidance, and shareholders who wish to vote on a proxy trust that they exercise their proxy in a thoughtful and transparent manner. But with only two players dominating the field, he is, are investors really getting the diverse perspectives they need to make informed proxy votes?
there is a new database, oxproxFounded by CFA’s Ian Robertson, co-author of this article, OxProx, a social venture spin-off with the University of Oxford, is the first publicly accessible source to collect, research and compare voting records across assets. Service. It brings together owners and property managers from around the world.
Importance of the ISS and Glass Lewis
Indeed, ISS and Glass Lewis are key pillars of the voting system by providing research, guidance and record keeping. An investor with thousands of shares in a portfolio can hardly investigate each proxy vote. They would be better off enacting policies to guide the vote, paying more attention to specific issues that align with their expertise and interests.
Are two platforms enough?
Regulators, academics and investors believe that the prominence of ISS and Glass Lewis may lead to a lack of alternative views on how shareholders vote, and therefore recommend voting advisory services to which investors subscribe. We acknowledge that we may be compelled to comply with
Pension plans and other large investors will have the ability to mitigate this double monopoly problem by subscribing to either or both ISS and Glass Lewis and incorporating their guidance as an input rather than a default vote. I have. You can then layer your own research and views on specific proxy voting on top of what ISS and Glass Lewis offer, or what is possible through standard voting policy approaches. However, due to time and cost constraints, many SMEs almost always have no choice but to follow two big players.
and oxproxUsing our publicly accessible and searchable database of voting records worldwide, investors and analysts can see how investors voted on proxies and, if disclosed, You can compare what the voting basis was. When will investor proxy voting comply with ISS and Glass Lewis guidance? Do investors always support management and shareholder proposals? OxProx makes such data available and easy to find.
As a global database, OxProx facilitates more robust comparisons, as vote disclosure requirements and practices are administered at the national level.
Who Benefits from Proxy Data Transparency?
share action in England, like sowing seeds in the United States, and share Canada has significant work on ESG issues, among other stakeholder and shareholder advocacy groups. However, these organizations do not view voting through the lens of shareholders or financial materiality. This means that he will not be unduely influenced by whether certain of his ESG decisions materially affect shareholder interests. Rather, he works with companies and industry on greenhouse gas emissions and other ESG issues, and advocates for change that benefits all stakeholders and society at large, even if it may reduce shareholder returns. increase.
OxProx data helps organizations inform how to approach and hold companies and investors accountable when policy votes run counter to long-term shareholder and stakeholder interests.Contested board elections ExxonMobil in 2021 is a prime example.. Investment firm Engine No. 1, skeptical of the company’s carbon transition strategy, led a successful activist campaign to win a seat on the board.
Investors and Advisors
Voting systems are an important pipeline for public companies and their investors, and ISS and Glass Lewis are leading the way. However, the challenges of transparency and accountability are real, and OxProx is well positioned to address these shortcomings by providing accurate and timely data on how various investors voted. help.
As ESG factors become increasingly integral to investment decisions, platforms like OxProx can help drive responsible investment and drive positive change in corporate outcomes.
Over the years, reconciling ESG issues with investment performance has been a challenge for fiduciaries who equated ESG considerations with selecting stocks from their portfolios. All things being equal, the screened portfolio is less diversified. Without market mispricing of screened investments, such portfolios would have lower risk-adjusted returns. Incorporating his material ESG issues into investment analysis and stock selection is now standard practice for active managers and considered part of their fiduciary duty. For some executives, engaging with selected companies on ESG issues can provide additional analytical insights and encourage investee companies to pursue better shareholder and stakeholder outcomes.
Stakeholders and advocacy groups may encourage investment managers to seek better ESG performance. These may not increase the economic benefit, but they also do not detract from it.
In fact, the transparency provided by OxProx may persuade investors to improve proxy voting on ESG issues. This will help his ESG proposals with positive net present value (NPV) gain more support without diminishing financial returns.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect those of the CFA Institute or the author’s employer.
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