Proxy advisers have been mired in controversy due to perceived conflicts of interest and doubts about the adequacy of their resources. They are predicted to remain at the centre of attention, particularly after the launch of the “name-and-shame” register in the United Kingdom, providing details of those companies that failed to attain 80 per cent support for general meeting resolutions. Companies are also bound to react when it turns out to be a recommendation from a proxy adviser that tips the balance and puts them on the list.
Large institutions in both the US and Europe usually make up their own minds on controversial issues. However, when companies do not like a result, they often blame it on advice from proxy advisers. This, together with doubts on whether proxy advisers can feasibly follow up on all recommendations, leads to a trust deficit that needs to be addressed, especially in light of increasing transparency requirements on behalf of governments. While, according to Peter Montangon, more rules might not be the answer, he does suggest three ways in which the trust deficit could be addressed: applying solutions globally rather than at the national or regional level; paying firms more to ensure credible advice and providing means to challenge them if they are wrong.
The full article is available on Financial Times.