Australian proxy cull is a wolf in sheep’s clothing


MELBOURNE, Jan. 7 (Reuters Breakingviews) – Australian businesses have received more protection against cranky investors. Just before Christmas, the federal government imposed new rules on companies like Glass Lewis and the Australian Council of Superannuation Investors which offer voting advice to shareholders. At first glance, they seem to improve transparency. Second, they are too one-sided.

Treasurer Josh Frydenberg’s agency first proposed changes last april. The government has argued that Australia’s top four proxy advisory firms require increased scrutiny as they exert disproportionate influence over voting decisions, even though the Australian Securities and Investments Commission in 2017 determined that the rules existing were sufficient.

Standard procedure would be to invite industry comment, make adjustments, and then pass legislation. Frydenberg skipped the last part and went through the package, which includes asking proxy firms to re-apply for their licenses.

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One of the worst initial suggestions has been dropped, at least: Proxy advisers will not be required to provide their research to the affected company five days before releasing it to investor clients, which would have tipped the scales too much. . Instead, investors and management will get research at the same time. Pension funds must also disclose how they vote at annual meetings, although this only applies to superannuation funds, which manage the money employers set aside for staff retirement.

In fact, this section of the industry, which manages A $ 3.4 trillion ($ 2.5 trillion), appears to be the real target of Frydenberg’s push. The ruling right-wing coalition has never been a fan of the pensions sector, which was put together by the left-wing Labor Party. Before the new rules, some 36 pension funds held stakes in ASCI, which few saw as a problem. It seems that they will now have to divest themselves.

There are also some interesting changes missing. For example, it is virtually impossible for agitated shareholders of Australian companies to initiate their own resolutions. The workaround, as it exists, requires 75% of other owners to vote to change the company’s constitution to allow them. No such measure has ever been adopted without the support of the target.

Overall, shareholders of listed companies Down Under are starting 2022 on the back foot.

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Editing by Pete Sweeney and Katrina Hamlin

Our standards: Thomson Reuters Trust Principles.


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