March 20 (Reuters) - Proxy advisors should share drafts of their work with public companies, and fund managers should be aware of proxy advisors’ potential conflicts of interest, according to proposals offered by the U.S. Chamber of Commerce on Wednesday.
The ideas are contained in a “best practices” document the influential trade group issued in its latest effort to limit the influence of firms whose proxy voting recommendations are often critical of its corporate members.
Tom Quaadman, vice president of the Chamber’s Center for Capital Markets Competitiveness, said the ideas were meant to be voluntary, in lieu of formal rules from an agency like the U.S. Securities and Exchange Commission.
“We don’t think that regulation is the answer here,” Quaadman said in an interview. “We think this can be done by a collaborative effort by all the parties.”
The group, which represents 3 million businesses, suggested in the document that proxy advisors like closely held Glass, Lewis & Co and the Institutional Shareholder Services unit of MSCI Inc should provide public companies with drafts of their research reports, giving them time to identify “any factual inaccuracies or other concerns.”
Advisors’ research reports and recommendations that institutional shareholders vote “against” individual directors or prominent proxy resolutions can prove quite controversial.
Both Glass, Lewis and ISS had recommended shareholders of Hewlett-Packard Co oust directors at a meeting being held on Wednesday, for instance.
The proxy advisors have defended their work and drawn some support from big clients like mutual fund companies, which can wield much influence in corporate elections.
For mutual fund companies and other asset managers like hedge funds and pension funds, the Chamber offered other guidelines that could also diminish the advisors’ influence.
For instance, the Chamber suggested that in deciding whether to hire or retain a proxy advisor, asset managers should consider whether it discloses potential conflicts of interest.