Best Practice Principles improve transparency ESMA says

The Best Practice Principles for Shareholder Voting Research have improved transparency, so issuers and investors can better understand the work of proxy information providers and advisers, according to the EU’s European Securities and Markets Authority (ESMA).

However, the ESMA believes that the  industry group behind the Principles would benefit from better governance and further clarity over what monitoring it performs. The Principles were published in March 2014 following the work of the Best Practice Principles Group – made up of Glass, Lewis & Co., ISS, IVOX (now part of Glass Lewis), Manifest, PIRC and Proxinvest and all are now signatories to the Principles.

The Principles were developed in response to the ESMA’s 2013 recommendation to develop a code of conduct to improve investors’ and issuers’ understanding of what they can expect from proxy advisors.  The ESMA investigated and reported on the proxy voting industry and found that while there was no clear evidence of market failure in relation to proxy advisers’ interaction with investors and issuers, stakeholders raised a number of concerns regarding the independence of proxy advisers and the accuracy and reliability of their advice.  In its latest report the ESMA was monitoring the effectiveness of the Principles and it concluded that generally they were meeting the ESMA’s expectations although it acknowledged that the Principles only took effect during 2015.

The ESMA believes that the Best Practice Principles Group needs to be a continuing and active body which provides a clear governance framework for proxy information providers and advisers. The Group has existed without a chair since the publication of the principles and the ESMA suggests that a permanent chair position is created, possibly by rotating it through the signatory firms and also that an annual report reporting on compliance of the Principles and any improvements required would provide more reassurance to issuers and investors that the industry was taking transparency and concerns about conflicts of interest seriously. It may also mean that further players in the proxy information market would sign up to the Principles.

As a signatory to the Principles Manifest is committed to transparency and providing accurate information to our clients. Manifest does not provide voting advice but instead aims to provide institutional investors with the tools to make their own choices and to engage with companies as required before making voting decisions.

The Best Practice Principles Group will be publishing its workplan for 2016 in due course, more information can be found at


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