Proxy advisors

This Article considers the role of the corporate governance industry as a voluntary regulator. The corporate governance industry influences (and in some cases effectively controls) the votes of trillions of dollars of equity, and affects the governance policies and fortunes of thousands of companies through proxy voting recommendations and governance ratings. This Article considers the increasing influence of the corporate governance industry, and argues that potential conflicts of interest within some governance firms cast doubt on the reliability of their proxy advice and governance ratings. Additionally, governance firms may be overstepping their expertise in proxy voting decisions and in governance rating, in part because of their reliance on good governance metrics for which there is little evidentiary support. Finally, erroneous governance metrics (and indeed, a reliance on one-size-fits-all governance checklists) promoted by influential governance advisers not only affect important shareholder voting decisions and decisions on whether to invest in or divest from a particular company, but may also have a more general, harmful effect on corporate governance regulation. A number of academics have argued that federal expansion into corporate governance issues has significant negative consequences. Perhaps most importantly, Sarbanes-Oxley mandates specific governance policies rather than setting broad standards, thereby eliminating some vital flexibility in corporate governance. This Article argues that the corporate governance industry may have similarly harmful effects by pressuring companies to adopt a homogenized set of governance rules which may not be suited to the companies' respective requirements.

Les investisseurs institutionnels détiennent la majorité des actifs financiers dans les économies industrialisées, ce qui leur confère un rôle essentiel dans les sociétés cotées en bourse, pour les individus, pour l’environnement et pour le fonctionnement du système économique dans son ensemble. Longtemps considérés comme des pourvoyeurs de capitaux passifs, les investisseurs institutionnels s’engagent de plus en plus en leur qualité d’actionnaires.

L’étude propose une réflexion analytique de l’engagement actionnarial des investisseurs institutionnels. A cet effet, l’engagement actionnarial est étudié comme un mécanisme de gouvernance et de prise de décision d’une collectivité, ainsi que comme un moyen par lequel les investisseurs institutionnels assument leur responsabilité fiduciaire envers leurs bénéficiaires finaux.

This paper offers a structural tool for examining various parental liability approaches for the externalities of its subsidiaries, meaning in the context of this paper, the negative environmental impact of their operations. In order to conclude that the parent is liable for externalities of subsidiaries, one must be able to bypass the corporate privileges of separate legal personality and limited liability, either within traditional company law or within alternative approaches offered by notably tort and environmental law. The overall acceptance of companies within groups as single entities, instead of recognition of their factual, often closely interlinked economic relationship, is a well-known barrier within traditional company law. The situation is exacerbated by the general lack of an extraterritorial liability approach and of enforcement of the rare occurrences of such liability within the traditional company law context. This paper explores various liability approaches found in jurisdictions worldwide mainly based on mapping papers from the international Sustainable Companies Project. The author introduces a matrix in order to systemize the different approaches, distinguishing between three levels: domestic and extraterritorial, statutory and judicial and indirect and direct liability. A proper distinction between the different liability approaches can be valuable in order to identify the main barriers to group liability in regulation and in jurisprudence.

Partout en Europe, les agences de conseil de vote, communément appelés proxy advisors, ont gagé une influence cette dernière décennie. Les investisseurs institutionnels font généralement appel à leurs services pour les assister à exercer leurs nombreux droits de vote aux assemblées générales des sociétés cotées. La présence des conseillers en vote sur les marchés de capitaux suscite des réactions controverses. D’une part, ils sont perçus comme des forces motrices de la bonne gouvernance d’entreprise, d’autre part, leur activité commerciale et leur position de pouvoir soulève des interrogations quant à la manière dont ils élaborent leurs recommandations de vote et dont ils gèrent les conflits d’intérêts.
Face à l’influence grandissante des conseillers en vote, les régulateurs et législateurs ont entamé une réflexion sur un encadrement réglementaire approprié à leur égard. En incluant des exigences de transparence détaillées pour les proxy advisors dans la directive révisée sur les droits d’actionnaires de 2017, l’Union européenne a pris un rôle de précurseur en la matière.  La Suisse, en tant que pays tiers, n’était pas tenue de transposer les exigences de la directive européenne sur les droits d’actionnaires dans son droit national. Et pourtant, comme nous allons le voir, l’entrée en vigueur de la directive a des conséquences juridiques et pratiques pour les conseillers en vote suisses.
Face à ce contexte, l’objectif de cette contribution est d’examiner dans quelle mesure la réglementation européenne affecte la situation des agences de conseil en vote incorporées en Suisse et de proposer des paramètres quant à un encadrement réglementaire approprié du conseil en vote en droit suisse. L’article s’organise ainsi en deux volets. Tout d’abord, nous proposons une clarification sur l’influence des conseillers en vote et les principaux enjeux que comportent leur activité (I.). Le deuxième volet vise à éclairer le cadre normatif des agences de conseil de vote à l’échelle européenne et suisse (II).

Through the lens of assessing the likely regulatory impact of the 2017 EU Directive on Long-term Shareholder Engagement’s amendments to the Directive on Shareholder Rights, this article considers the mythical voice and stewardship role attributed by the EU to shareholders as active corporate governance gatekeepers and drivers of its long-term sustainability agenda. It identifies limitations of the Directive itself and practical challenges concerning the provisions on shareholder identification, executive pay, related party transactions, proxy advisors and shareholder engagement policies. It is argued that there is a considerable normative gap between the EU narrative of engagement and the challenge of engaging shareholders away from self-interest and rational apathy to fulfil a stewardship role.

What are proxy advisors. The reasons of proxy advising and its influence on corporate governance. How the best practice principles for providers of shareholder voting research & analysis answered the critical issues of proxy advising. Thesis conclusions. From soft law to hard law: prospect for the future of the proxy advising industry.

Through the lens of assessing the likely regulatory impact of the 2017 EU Directive on Long-term Shareholder Engagement and its amendments to the 2007 Directive on Shareholder Rights, this article considers the mythical voice and stewardship role attributed by the EU to shareholders as active corporate governance gatekeepers and drivers of its long-term sustainability agenda. It identifies limitations of the Directive itself and practical challenges concerning the provisions on shareholder identification, executive pay, related party transactions, proxy advisors and shareholder engagement policies. It is argued that there is a considerable normative gap between the EU narrative of engagement and the challenge of engaging shareholders away from self-interest and rational apathy to fulfil a stewardship role.

Au terme d’un processus de réforme animé et intense, la Directive (UE) 2017 en vue de promouvoir l’engagement à long terme des actionnaires (Directive sur les droits des actionnaires II, ci-après également SHRD II) vise à passer en revue une partie — et pas seulement — de la dynamique des sociétés cotées. Cet objectif fournit des éléments de réflexion intéressants pour les sociétés non cotées qui, il faut l’espérer, s’inspireront des solutions adoptées dans le cadre spécial. En particulier, certains éléments qui caractérisent le nouveau cadre communautaire sont extrêmement importants, tels que (i) un ensemble d’instruments visant à garantir l’implication complète et informée des actionnaires dans la vie de la société et, plus généralement, (ii) une augmentation du « contrôle » des actionnaires — bien qu’indirect, par le biais de la rémunération — sur les administrateurs. Le but de cet article est de réaliser une analyse — étayée par une vision comparative au niveau de l’UE, et plus particulièrement en Italie — de la position des actionnaires dans le contexte des sociétés cotées, avec une attention particulière à la rémunération des administrateurs, à la lumière de l’expérience italienne (en particulier sur les effets du vote consultatif sur la rémunération dans un contexte de propriété concentrée).
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Following a vibrant and thorough reform process, Directive (EU) 2017 to promote long-term shareholder engagement (Shareholder Rights Directive II, hereinafter also SHRD II) aims to address some of—but not only—the dynamics of listed companies. This objective provides interesting food for thought for non-listed companies, which will hopefully be inspired by the solutions adopted in this framework.  In particular, certain elements that characterise the new European context are of the utmost significance, such as (i) a set of instruments to ensure a full in-depth and informed involvement of shareholders in the company’s life and, more broadly, (ii) an increase in the degree of shareholders’ control—although indirect, to be exercised through remuneration—over the directors. The purpose of this article is to carry out an assessment—underpinned by a comparative view at the EU level, and especially in Italy—of shareholders’ interests in the context of listed companies, with an emphasis on directors’ compensation, in the light of Italian experience  (in particular on the impact of a consultative voting on compensation in a concentrated ownership scenario).

The role of proxy advisors has increasing relevance because the Securities and Exchange Commission has recently undertaken a review of the mechanisms of proxy voting - less gracefully but perhaps aptly described as “proxy plumbing” - and the role of proxy advisors in that process. This short essay discusses the role of proxy advisors and their regulation. In particular, the essay addresses why institutional investors purchase corporate governance ratings and advice despite the fact that the advice appears to be of poor quality. The essay then discusses potential regulation of proxy advisors by the Securities & Exchange Commission.