Pérez-Llorca/IE Chair : What effect do proxy advisors have on good corporate governance?

This new Corporate Governance agent has been the source of great debate in recent years, since the role is crucial in advising on the voting of shareholders of listed companies.

José Ramón de Hoces, State Advocate on leave of absence and Public Law Partner at Pérez-Llorca, introduced the topic and the speakers, who addressed the issue from their different perspectives.

The session began by going over the history and regulation of institutional investors and proxy advisors, highlighting how the configuration of the exercise of voting rights and the need for it to be responsible lead to the emergence of advisors such as the proxy advisers.

The fact that proxy advisors operate in an oligopolistic market was also mentioned, along with their international origin and the scope of responsibility of these agents, both in terms of voting and in terms of the shareholders they advise.

Tomás Garicano, Lecturer at IE Business School, analysed the proxy advisors and their role as secondary stakeholders vis-à-vis primary stakeholders, which in this case are the shareholders they advise, who are also called “activists” or “assets”. Garicano raised some conceptual issues such as who the proxy advisors are, the duties they perform and the problems which arise as a result.

He also made reference to proxy solicitors, which are related to proxy advisors, and discussed the reasons for their existence and what they offer investors. He ended by calling for the alignment of all stakeholders, with a clear strategy for good corporate governance.

Lastly, Rafael Piqueras, General Secretary of Enagás, addressed this issue drawing on his professional experience. Piqueras made reference to the existence of conflicts of interest, as well as the need for greater regulation and for proxy advisors to have more detailed knowledge of the reality of Spain. He also explained that the action of proxy advisors has contributed to the improvement of the corporate governance of Spanish companies.

After these presentations, de Hoces raised some related questions, which were debated. Attendees then asked questions about the regulation of these agents, their knowledge of the subject of their advice and the barriers to entry to the business, which is currently an oligopoly.