European securities regulators launched a consultation on the proxy advisory industry Thursday, following a similar pledge from Canadian regulators.
The European Securities and Markets Authority published a discussion paper today that examines the development of the proxy advisory industry in Europe. It notes that proxy advisors, which primarily serve institutional investors such as asset managers, mutual funds and pension funds, are growing in prominence and influence.
The paper identifies several issues related to the proxy advisory market which may have an impact on the proper functioning of the shareholder voting process. In articular, it points to the potential for conflicts of interest, proxy advisors’ methodology and their dialogue with issuers; and, the degree of transparency on the management of conflicts, dialogue with issuers, the voting policies and guidelines, the voting recommendations, and the procedures for developing a voting recommendation.
The ESMA says that it will consider several policy options based on the feedback it receives to the consultation. It expects to publish a feedback statement in the fourth quarter, which will summarize the responses received and set out its view on whether there is a need for policy action in this area.
The paper from European regulators follows an indication earlier this week that Canadian regulators will be examining the issue, too. In a speech, Maureen Jensen, executive director of the Ontario Securities Commission, said that the Canadian Securities Administrators will soon soliciting feedback about the role of proxy advisors in influencing shareholder voting.