On 2 February 2010 Pensions Investment Research Consultants (PIRC) published a number of principles of best practice for proxy voting and corporate governance advisers. PIRC points out that the transparency and accountability of institutional investors in respect of their ownership activity has increased in light of the financial crisis. PIRC believes that this spirit of accountability should be extended to firms and businesses like itself that assist institutional shareholders in addressing issues relating to ownership by providing research, analysis and voting recommendations. PIRC is of the view that such firms and businesses should be accountable not only to their clients, but to the capital markets in which they operate and to the investing public.
PIRC has examined the draft Stewardship Code for Institutional Investors published by the Financial Reporting Council for consultation in January 2010 and considered how those providing voting advisory services can exhibit the same openness and accountability that the Stewardship Code expects of both companies and investors. As a result, it has developed the following six principles of best practice for proxy voting and corporate governance advisers:
- Clear voting policy guidelines should be publicly available;
- A clear audit trail and explanation of the process for assessing companies and making voting recommendations should be available to clients and the companies monitored;
- Possible conflicts of interest should be disclosed to clients and the companies monitored and, where necessary, to market regulators;
- Companies monitored should be given reasonable opportunity to comment on voting recommendations made and the basis of such recommendations;
- Voting agencies should routinely report to clients on actions taken on their behalf; and
- All voting recommendations made by a voting adviser should be publicly disclosed post-meeting.
PIRC welcomes comment from companies, investors and advisory services on its principles of best practice.