Big super funds push back push back on corporate activism

The Australian Council of Superannuation Investors has hit back against Josh Frydenberg’s crackdown on corporate activism.

The Australian Council of Superannuation Investors – whose members include super fund giants AustralianSuper, Cbus and Hostplus – has pushed back against Josh Frydenberg’s crackdown on corporate activism.

ACSI, one of Australia’s biggest proxy advisers with super fund members managing more than $1 trillion in assets, told Treasury it was “very concerned” by aspects of the proposed overhaul and warned it would “hamper the ability of trustees to act in the best financial interests of their beneficiaries”.

Treasury named ACSI as one of Australia’s big four proxy advisory firms in its Greater Transparency of Proxy Advice consultation paper alongside Institutional Shareholder Services Australia, CGI Glass Lewis and Ownership Matters.

ACSI chief executive Louise Davidson said there was “no clear rationale” for the crackdown and that its 36 Australian and international asset owners and institutional investors recognised that environmental, social and corporate governance risks, including climate change, would “have a material impact on investment outcomes”.

“It seems to be a solution looking for a problem to solve. The Treasury consultation paper raises a number of issues that we don’t think are actually problems that need to be solved in Australia,” Ms Davidson said.

“There is an attempt in the paper to compare Australia’s regulatory system for proxy advice and exercise of ownership rights unfavourably with the situations in the UK and US. That doesn’t really hit the mark.”

ACSI’s members, which also include UniSuper, HESTA, QSuper and TWUSuper, own on average 10 per cent of every ASX200 company, with its board headed by AustralianSuper chief executive Ian Silk.

Mr Frydenberg last month revealed details of the government’s proposed new regulation on proxy advisers which would force them to provide evidence backing-up contentious votes and giving companies prior warning.

Announcing a one-month consultation process, the Treasurer said the proxy advice market is “dominated by just four firms who advise superannuation funds, which own around 20 per cent of the Australian Stock Exchange, equivalent to $440bn”.

“These super funds often rely on proxy advice to make decisions on behalf of millions of Australians who have invested their savings in listed companies,” Mr Frydenberg said.

“Australians deserve to know that the advice their superannuation funds are receiving is transparent, accurate and independent.”

In its 17-page submission to Treasury, ACSI said of the 1321 resolutions proposed at meetings of the ASX200 last year, “91.2 per cent of ACSI recommendations were in line with board recommendations”.

“Of the 1321 resolutions … there were just 36 resolutions (2.7 per cent) where the result did not reflect the board’s recommendation. These statistics demonstrate that the impact of governance research on voting outcomes continues to be overstated,” the submission said.

“Proxy advisers are already subject to appropriate regulation. Proxy advisers in Australia hold AFS licenses and are subject to provisions in the Corporations Act prohibiting misleading or deceptive conduct.”

Ms Davidson said it was vital that super funds can exercise their voting rights, which was an “important part of their fiduciary duty”.

“We provide voting advice but we don’t compel members to vote in accord with our recommendations. The idea that somehow there’s this big group of super funds working to decide their votes together is completely wrong,” she said.

Ms Davidson also questioned criticism that companies are not afforded prior notice of contentious resolutions.

“We don’t provide proxy advice in a vacuum. We meet with companies through the year. Our proxy voting advice wouldn’t come as a surprise once it is released.”

The ACSI chief said they supported super funds and asset managers being transparent about their voting and a consistent industry standard similar to the UK Stewardship Code.

Under the government’s proposed regime, super funds would need to “make publicly available more detailed information on their voting record, including whether a vote was consistent with any proxy advice received; and outline how they exercise independent judgment in the determination of their voting positions”.