Teaminvest, TIP Group partner in push to counter proxy influence

More than 600 high net worth investors are teaming up with ASX-listed fund manager TIP Group in a new push to counter the rising influence of proxy advisers.

Teaminvest co-founder Howard Coleman. Pic by James Croucher

More than 600 high net worth members of investor group Teaminvest are partnering with fund manager TIP Group in a new push to defend high performing company boards against the “undue external influences” of proxy advisers.

Teaminvest and TIP Group argue conflicts of interest complicate recommendations made by proxy firms to superannuation funds and other large institutional investors, often leading to poor governance outcomes for companies, and ultimately, their shareholders.

As part of the new governance initiative, the two groups are using their collective clout to exert more influence over the governance of companies in which Teaminvest members and TIP Group funds are collectively among the largest shareholders. The list of companies includes retailers Nick Scali, Accent Group and JB Hi-Fi.

TIP Group chief executive Andrew Coleman said the move was designed to influence executive remuneration policies and the composition of company boards. He said the investor groups were positioning themselves as an “ally rather than an adversary”.

“Our strategy of leveraging our collective clout is aimed at supporting well-established and efficiently managed companies in which we have skin in the game, in contrast with the common practice among proxy advisers who often lack direct investment stakes in the companies they advise,” he said.

“We aim to insulate select companies - those with proven track records of delivering excellent returns to shareholders - from the potentially detrimental influence of proxy advisers and the broader consulting industry.

“The focus is on supporting decision-making that aligns with shareholders’ interests, rather than adopting generic governance advice that may not suit the specific context of each company. Proxy advisers’ recommendations, especially concerning remuneration reports and board composition, are not necessarily aligned with shareholders’ interests but are rather geared towards the advisers’ consultancy benefits.

“This misalignment suggests a conflict of interest, where proxy advisers’ involvement becomes self-perpetuating and detached from genuine shareholder value.”

ASX-listed TIP Group was borne out of Teaminvest, a member-based organisation established by investors Howard Coleman, John Price and Mark Moreland in 2008. Inspired by the value approach of US billionaire investor Warren Buffett, they created a forum for investors to share investment ideas, inspect companies and analyse the share market.

The new governance strategy involves TIP Group preparing proxy reports based on Teaminvest’s investment principles and insights.

With super funds now accounting for close to 40 per cent of the holdings of ASX-listed companies, the influence of proxy advisers - who are often relied on for advice about executive remuneration policies and other important corporate governance policies - has increased in recent years.

In 2022, controversial regulations introduced by the Morrison government, requiring more transparency and independence in the sector, were struck down in the Senate.

Mr (Howard) Coleman said proxy advisers continued to exert significant influence over corporate governance policies, and their recommendations were not always in the best long-term interest of shareholders.

He said Teaminvest members were looking to increase their support of companies facing “undue external influences”, and reflected a move towards more active engagement in companies they were invested in.

“We’ve identified an alarming trend where the expansion of board size, particularly with independent directors, has inadvertently led to a destruction of shareholder value,” he said.

“Our stance, backed by thorough research, is to resist this one-size-fits-all rhetoric on governance being propagated by corporate advisers.

“There’s a prevailing notion that boards should comprise individuals unfamiliar with the industry to provide ‘independent’ oversight, but evidence suggests this may lead to poorer management decisions. We advocate for the retention of industry knowledge and experience in board composition, which we believe is crucial for the success of our investments.”

Remuneration was a key focus for shareholders during last year’s annual general meeting season, with a record 41 “strikes” against pay reports across the ASX300, up from 24 in 2022 and the previous record of 26 in 2019.

Proxy advisers successfully pushed for “strikes” against the remuneration reports of companies including Qantas, Fortescue and Whitehaven Coal.