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
CIRI is proposing the following regulations:
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.
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.
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.
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.
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.
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
For a complete copy of CIRI's letter to the CSA, please visit www.ciri.org
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 www.ciri.org.
SOURCE: Canadian Investor Relations Institute
For further information:
President and Chief Executive Officer, CIRI
Vice President, Communications & Professional Development, CIRI