Report of the Chairman of the Best Practice Principles Group Developing the Best Practice Principles for Shareholder Voting Research & Analysis

106 Pages Posted: 16 May 2014  

Dirk A. Zetzsche

ADA Chair in Financial Law / Inclusive Finance, University of Luxembourg; Heinrich Heine University Duesseldorf - Faculty of Law - Center for Business & Corporate Law (CBC)

Date Written: May 12, 2014

Abstract

Following the publication of the ESMA Final Report and Feedback Statement on the Consultation Regarding the Role of the Proxy Advisory Industry in February 2013, a number of industry members formed a committee under the independent chairmanship of Prof. Dr. Dirk Andreas Zetzsche, LL.M. (Toronto), to develop an industry code of conduct. The “Best Practice Principles for Providers of Shareholder Voting Research & Analysis” were published in April 2014. With this report, the chair aims to make the committee’s work and discussions transparent to facilitate the application of the provisions and enhance understanding of the reasoning behind their adoption. The report also aims to enhance transparency and understanding on the functioning of Providers of Shareholder Voting Research & Analysis (to which is commonly referred to as the proxy advisors) and their role in corporate governance and assist in creating a more informed discussion.

The report is structured as follows: After an introduction (sub 1.), I describe the composition and work organization of the drafting committee for the Principles (sub 2.), before I explain the Committee’s as well as the Chair’s position on the certain provisions of the Principles (sub 3.). The report discusses, inter alia, the scope of the Principles, the Committee’s general approach, the delineation of responsibility between proxy advisors, institutional investors and issuers that forms the basis of the Principles, the attitude of the industry towards local governance standards, and how Signatories should deal with conflicts of interests. A major section of the report is devoted to the communication between issuers and Providers of Shareholder Voting Research & Analysis (sub 4.). In particular I explain why a mandatory distribution of research report to issuers would put the providers’ commitment vis-à-vis their clients (the investors) at risk. I further undertake to outline how the Principles may be enforced (sub 5.) and describe the next steps on the Committee’s agenda (sub 6.).

Three further documents issued by the Committee are annexed to the report: I. The “Best Practice Principles for Providers of Shareholder Voting Research & Analysis” discussed in the report, II. The consultation document distributed by the Committee to stakeholders in fall 2013, and III. The Feedback Statement on the Consultation.

Keywords: best practice, code of conduct, shareholder voting, proxy advisor, proxy advisory firms, institutional investors, corporate governance, ESMA, European securities law

JEL Classification: K22, K23, K42

Suggested Citation

Zetzsche, Dirk A., Report of the Chairman of the Best Practice Principles Group Developing the Best Practice Principles for Shareholder Voting Research & Analysis (May 12, 2014). Available at SSRN: https://ssrn.com/abstract=2436066 or http://dx.doi.org/10.2139/ssrn.2436066

Dirk Andreas Zetzsche (Contact Author)

ADA Chair in Financial Law / Inclusive Finance, University of Luxembourg ( email )

Luxembourg, L-1511
Luxembourg

HOME PAGE: http://wwwen.uni.lu/recherche/fdef/research_unit_in_law/equipe/dirk_andreas_zetzsche

Heinrich Heine University Duesseldorf - Faculty of Law - Center for Business & Corporate Law (CBC) ( email )

Universitaetsstr. 1
D-40225 Düsseldorf
Germany
+49 211 81 15084 (Phone)
+49 211 81 11427 (Fax)

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