Proxy advisers make factual errors: AIRA

Proxy advisers are making factual errors in their reports which critically influence votes cast by major institutional shareholders, according to the study carried out by the Australasian Investor Relations Association (AIRA).


To address the problem, AIRA said it called on all parties to adopt the voluntary Code of Engagement to improve interaction between proxy advisers and listed entities.

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The survey, which collected responses from 52 listed companies including 46 in the ASX200, found that the majority of respondents said they had found errors in reports written by proxy advisers on them.

Additionally, the survey identified the specific areas where errors by proxy advisers were made, which included:

  • their understanding of normalised profit frameworks
  • misunderstanding of long-term incentives in remuneration reports
  • incorrect year-on-year comparisons of key financial metrics
  • incorrect details of shareholder approvals already in place

According to the survey, 94 per cent of respondents also said they would want to fact check the actual accuracy of their data before publication as well as they wished to be offered the opportunity to arrange meetings with one or more of the proxy advisers that cover their companies.

Respondents also stressed that proxy advisers in some cases were encroaching into areas traditionally covered in stockbroker reports, indicating that additional regulations may be required.

The study found that of all the four proxy advisory firms which included Institutional Shareholder Services (ISS), CGI Glass Lewis, Ownership Matters and The Australian Council of Superannuation Investors (ASCI), only CGI Glass Lewis was identified to have corrected reports which stated the inaccurate information.

AIRA’s chief executive, Ian Matheson said: “All proxy advisers have AFSL licenses, but that only covers financial advice and not the vast majority of the other advice on resolutions at AGMs that they generate.

“It might be time for that to change.”


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