What Are Proxy Advisory Firms?
Proxy advisory firms provide institutional investors with research and data, as well as recommendations on management and shareholder proxy proposals that are voted on at an organization’s annual and special meetings. Operating as independent research firms, they digest and evaluate lengthy and complex filings on common corporate endeavors, including mergers & acquisitions, CEO salary, and more. By bringing their expert knowledge to bear on these issues, proxy advisors enable key shareholders to protect their interests by helping them make an informed voting decision. Proxy advisory firms provide these voting recommendations to institutional investors for the companies that they own shares in.
Areas that proxy advisory firms support include:
- Environment, social, and governance (ESG)
- Proxy voting
- Proxy research
- Executive compensation models
- Board diversity
Why Are Proxy Advisors Important?
Proxy advisory firms provide an essential service and help shareholders make decisions on numerous high-level matters that they aren’t always able to keep up with on their own. Without firms like Glass Lewis, investors and shareholders wouldn’t have the time to research agenda items in order to make informed decisions. Providing independent research and heavily-analyzed data based on current and projected market conditions, proxy advisory firms are able to help shareholders make educated decisions that benefit the company as well as their own investments.
Why You Should Care
High-level investors typically own stock in multiple companies but are unable to attend annual general meetings or extraordinary general meetings for all of them. When this is the case, proxy advisory firms can offer valuable insight into how they should vote on significant corporate actions to ensure continued success across their portfolios. Furthermore, because they reflect the consensus views of their clients, companies may look to proxy advisors’ policies as governance best practices, which provides value to all investors with a stake in the company governance.
How Proxy Advisory Firms Fit In
Proxy advisory firms exist to provide sound recommendations with regards to financial transactions, compensation, and more and can enhance an organization’s stewardship and ESG program. By advising shareholders on these issues, proxy advisors help promote strong corporate governance.
The Three Main Takeaways
Proxy advisory firms play a key role in corporate governance
By scouring over detailed corporate information and analyzing copious amounts of data, proxy advisory firms play a key role in making our corporate governance system effective, boosting the accountability, transparency, and engagement of board members and shareholders.
Proxy advisory firms reflect corporate best practice
As noted above, many companies look to proxy advisors, such as Glass Lewis, for best practices on governance and executive compensation. By engaging a proxy advisory firm, corporations can gain insights on industry standards for compensation as well as ESG and other matters.
Proxy advisory firms help to drive positive growth
Effective corporate governance can make a significant difference in the long-term growth of an organization. By encouraging better governance, proxy advisory firms help pave the way for organizations to flourish in an ever-changing marketplace.
Reimagine your stewardship program with Glass Lewis. Talk to us today about how we can help with your governance needs.