Accountants join revolt over Frydenberg’s proxy advice reforms

“It’s preposterous,” said Dean Paatsch, one of the co-founders of Ownership Matters. “This is my private property. How dare they capture the government to get a free copy in advance of my clients – to prevent me from talking to my clients – until their vetting period had expired. It’s like something out of Eastern Europe in the Cold War.”

The BCA said in its submission that proxy advisers had an important role in the economy but the changes were still necessary. It argued that the consequences of incorrect proxy advice could cause a loss of confidence in a company and adversely affect its share price, as well preventing the election of directors to boards or even a takeover or restructuring from occurring.

“These are modest and necessary changes that will enhance the operation of financial markets by introducing higher standards of accountability for proxy advisers and, most importantly, improve the quality of the service they provide to investors,” the BCA said. “Ultimately, the company and company directors have strict obligations to act in their best interests of shareholders and provide accurate and timely information. Similar obligations should also apply to those who advise shareholders.”

Activist investment manager Sandon Capital said in its submission to Treasury there were too many instances of persistently underperforming companies, whose management and directors remain entrenched and safe from accountability.

It pointed to a number of high-profile corporate scandals in recent years at companies such as Commonwealth Bank, Westpac, National Australia Bank, Crown and AMP. “In each instance, we believe stronger oversight and influence by shareholders, as the ultimate owners, may have helped avoid the worst of these scandals,” said Gabriel Radzyminski, director and founder of Sandon Capital.

“The consultation paper paints a picture of corporate Australia under siege by an unregulated and unfettered proxy advisory industry, prone to errors and misstatements. There is no evidence to support this.”

Currently proxy advisers are required to hold a financial services licence. However, an exemption for groups such as the Australian Shareholders’ Association, and environmental or social interest bodies was put in place by the Howard government.

The lack of detail in the consultation paper has raised concerns that the exemption could be removed, forcing groups as varied as the Australasian Centre for Corporate Responsibility, GetUp! and Lock the Gate to hold a financial services licence.

Brynn O’Brien, the executive director of the Australasian Centre for Corporate Responsibility, said the exemption served a public purpose. “It is there to facilitate public conversation about corporate governance. We live in a free and open society and we’re allowed to express opinions. Corporations benefit from robust exchanges with their shareholders about voting at AGMs.”

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