CIRI Calls for Regulation of Proxy Advisory Firms to Improve The Quality of the Shareholder Vote

TORONTO, Sept. 12, 2012 /CNW/ - The Canadian Investor Relations Institute (CIRI) today submitted a recommendation to the Canadian Securities Administrators (CSA) that Proxy Advisory Firms be subject to a level of regulatory oversight in order to ensure transparency and the quality of the shareholder vote, thereby contributing to the integrity of the Canadian capital market.

CIRI's letter to the CSA points out that Proxy Advisory Firms have increased influence on the proxy voting process; issue research reports with factual errors; and have to-date demonstrated a lack of transparency and engagement.

"The current processes are flawed and lack transparency. All issuers should be engaged in the report review process to ensure factual accuracy," says Tom Enright, President and Chief Executive Officer, CIRI. "With the proposed regulatory changes in place, we believe that shareholders would be better informed when voting their shares."

In a recent CIRI survey of its practitioner members, one-third of survey respondents indicated factual inaccuracies in Proxy Advisory Firm reports occurred at least 50% of the time over the past five years. All respondents felt it appropriate that Proxy Advisory Firms be required to disclose their methodologies; sources of information used; and assumptions and rationale for their vote recommendations. Nearly 87% of respondents agreed that Proxy Advisory Firms should be required to disclose any issuer comments regarding the analysis, factual information used, and voting recommendations in their final report to their clients.

CIRI is proposing the following regulations:

a)      Proxy Advisory Firms should be required to disclose methodologies, sources of information, assumptions used to prepare their research reports, and rationale for their voting recommendations.
b)      Proxy Advisory Firms should prominently identify in the research reports and voting recommendations provided to their institutional investor clients, any specific potential conflicts of interest with regard to the issuer and analyst/reviewer ownership interests.
c)      Proxy Advisory Firms should be required to provide to all issuers draft research reports and voting recommendations for review for factual accuracy, allowing 48 to 72 business hours for issuers to respond, prior to the report being distributed to the PA Firm's clients.
d)      Proxy Advisory Firms should be required to include in the final report to investors any comments provided by issuers regarding the review process, the research report and the voting recommendations.
e)      Proxy Advisory Firms should establish an appeals process and identify an independent third-party or Ombudsman to adjudicate on behalf of those issuers who have concerns about a research report that cannot be resolved through direct dialogue with the Firm.
f)      Institutional investors who use a Proxy Advisory Firm should comply or explain why they do not comply, with a requirement to disclose how they assess the advice received from the Firm and not automatically follow it.

For a complete copy of CIRI's letter to the CSA, please visit

About CIRI

CIRI is a professional, not-for-profit association of executives responsible for communication between public corporations, investors and the financial community. CIRI contributes to the transparency and integrity of the Canadian capital market by advancing the practice of investor relations, the professional competency of its members and the stature of the profession. With more than 600 members and four chapters across the country, CIRI is the voice of IR in Canada. For further information, please visit

SOURCE: Canadian Investor Relations Institute

For further information:

Tom Enright
President and Chief Executive Officer, CIRI
(416) 364-8200

Yvette Lokker
Vice President, Communications & Professional Development, CIRI
(416) 629-3269

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Canadian Investor Relations Institute

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