Millstein Center Proposes First Code of Conduct for Proxy Advisors
New Haven, Conn., March 2, 2009 — The Millstein Center for Corporate Governance and Performance at the Yale School of Management is today proposing a series of breakthrough steps to boost transparency among institutional investors and the proxy voting services that advise them on relations with corporations.
The Millstein Center calls on institutional investors to be more transparent about the way they act as owners of public corporations by disclosing how they vote, what ownership policies they follow, and what resources they put into engagement efforts.
The Center also proposes the first industry-wide code of professional conduct for proxy services as a means of increasing transparency and policing conflicts of interest within the industry. Practices highlighted in the code include a ban on a vote advisor performing consulting work for any company on which it provides voting recommendations or ratings. Proxy voting advisors Glass, Lewis & Co. and PROXY Governance, Inc. have already welcomed the proposed code.
Fund recommendations and the code of conduct are among a number of improvements to proxy voting systems and decision-making outlined in the Millstein Center policy briefing Voting Integrity: Practices for Investors and the Global Proxy Advisory Industry, which will be presented tomorrow at the International Corporate Governance Network mid-year meeting in Amsterdam. View the report online.
"The economic crisis has highlighted as never before that the capital market’s health hinges on a reliable, open and efficient proxy voting system to keep corporate boards accountable," said Ira M. Millstein, senior associate dean for corporate governance at the Yale School of Management. "The time has come for practical fixes."
The briefing goes on to recommend that the U.S. Securities and Exchange Commission empanel an independent blue ribbon commission to modernize the U.S. share voting system; and that regulators should work with counterpart bodies in other markets to supervise the seamless integration of national systems to enable accurate and efficient cross-border voting.
Voting Integrity is based on independent research and insights from a roundtable of major U.S. and European institutional investors and proxy advisors convened by the Millstein Center on January 29, 2008 and chaired by Lynn Turner, former chief accountant to the SEC and former executive of Glass, Lewis & Co.
The Millstein Center for Corporate Governance and Performance at the Yale School of Management is a leading global resource for testing, challenging, and advancing the premise that corporations should and can serve society. The Center pursues its mission by convening events; sponsoring empirical research; generating policy briefing; building market capacity by developing training, databases and institutions; and teaching and student interaction.
The mission of the Yale School of Management is to educate leaders for business and society. Founded in 1974, it is the youngest of Yale University’s professional schools. The school offers a two-year full-time MBA degree, an MBA for Executives program tailored for health care professionals, a Ph.D. program, and executive education programs. In the 2006, the school launched its innovative, integrated MBA curriculum. For more information, please visit: www.mba.yale.edu.
Senior Fellow, Millstein Center
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