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September 05, 2003
New Proxy Voting Recommendation Service Provides Choice, Objectivity
by William Baue
Investor Responsibility Research Center teams with Glass, Lewis & Co. to provide proxy voting
recommendations and voting services to institutional investors.
SocialFunds.com --
Institutional investors seeking recommendations on how to vote proxies now have an option in
addition to Institutional Shareholder
Services (ISS). Earlier this week, the Investor
Responsibility Research Center (IRRC), in conjunction with Glass, Lewis & Co., announced the launch of a new proxy voting
service called the Voting Agency Service.
 Glass Lewis, a new advisory firm that
specializes in financial analysis of proxy issues, will handle the vote recommendations while IRRC,
which specializes in impartial research and proxy voting services, will administer the voting
process.
"ISS has never had any competition for clients who want recommendations
voted--our partnership with Glass Lewis is focused on offering the market another option," said
Michelle Soulé, IRRC's director of marketing. "There's a big market out there that has requested
our services with recommendations, and we've never been able to offer that because impartiality is
part of our mantra."
Both IRRC and Glass Lewis emphasize the unbiased nature of their
services.
"This offering will be the only objective, comprehensive voting agency solution
in the market," said Gregory P. Taxin, CEO of Glass Lewis.
"We're all calling it objective
because it's not in the ISS arena of conflict of interests," added Ms. Soulé. "That has been a
thorn in their shoe, because they have marketed to both the corporations and the institutional
investors, so there's a real conflict there."
Corporations can purchase ISS
recommendations as well as ISS corporate governance scorecards to encourage companies to improve
their governance and management (and thereby their ratings).
Mr. Taxin points out that
this receiving money from the very entities being evaluated not only represents an inherent
conflict of interests, but also it allows companies to finesse the scoring system, making
superficial changes simply to boost their ratings.
Glass Lewis maintains a strict policy against
receiving fees from corporations in order to prevent conflicts of interest. Glass Lewis executives
sit on a few corporate boards, so the firm does not provide recommendations on those companies.
"You're going to see a lot of differences between the Glass Lewis and the ISS
recommendations," Ms. Soulé told SocialFunds.com.
The introduction of competing services
in the marketplace may benefit institutional investors by giving them access to a diversity of
opinion. Ms. Soulé thinks that many institutional investors, particularly the larger ones, will
buy both sets of recommendations before deciding on how to vote their proxies. The Voting Agency
Service can decouple the recommendations from the voting mechanism, allowing clients to vote
against Glass Lewis' recommendation while still retaining IRRC's voting services.
Existing IRRC clients will have access to Glass Lewis' recommendations, but not the underlying
analysis.
"As a fiduciary, it's helpful to have the recommendations, but you almost have
to understand why, so that analysis is key," said Ms. Soulé. "I think they're going to buy it
all."
©
SRI World Group, Inc. All Rights Reserved.
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