ACSI’s report identifies 9 cases of significant disparity between proxy voting instructions given by a sample of 23 institutional investors and the eventual declared result from all 1,895 resolutions considered at meetings of S&P/ASX300 companies during 2011. Based on the observations in the report, ACSI makes a number of practical reform suggestions to improve the operation of Australia’s proxy voting system. Listed companies may wish to review the processes followed by their registries in counting votes, in light of some of the findings in the report.
The Australian Council of Superannuation Investors (ACSI) has released a report entitled Institutional Proxy Voting in Australia, which examines the voting experience of 23 major institutional investors in all 1,895 resolutions considered at meetings of S&P/ASX300 companies during 2011. The research methodology was to compare the voting instructions initially lodged by these institutional investors with the results eventually declared by the relevant companies and identify the points in the chain of intermediaries to show where the errors occurred.
While the report found significant disparity between the instructions and the declared result in only 9 instances, the report notes that it is likely that further anomalies will have occurred based on assumptions about the likely voting activities of institutional investors outside of the specific sample.
The report outlines evidence of a number of operational weaknesses in the systems used to cast votes including unrealistic deadlines for sub-custodian messages, lack of reconciliation of holdings data with votes lodged and the extensive use of faxes to submit proxies.
On the part of companies and their registries, the report notes differing practices regarding voting exclusions (particularly on capital raising resolutions), a low take up of institutional electronic proxy lodgement (around 17%), the lack of an audit trail, and a propensity to pass resolutions by show of hands from those present at the meeting (70% of all cases) rather than call a poll to count the proxies submitted by all investors.
The report provides a series of recommended changes to existing market practices and potential regulatory reforms to improve Australia’s proxy voting system. These recommendations include:
- a separation of the cut-off dates for voting entitlements and vote lodgement;
- the ability for shareholders to appoint independent scrutineers to review tight results; and
- a requirement for all listed company resolutions to be resolved by poll and not a show of hands.
See the report.
See ACSI’s media release, dated 19 October 2012.