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ESMA publishes Report on Proxy Advisors’ Best Practice Principles

18 December 2015

The European Securities and Markets Authority (ESMA) today published its Follow-up Report on the development of the ‘Best Practice Principles for Providers of Shareholder Voting Research and Analysis’ (Principles) which looks at the proxy advisory industry’s progress in establishing and following a self-regulatory code of conduct.


Overall, ESMA finds that the industry is moving in the right direction but sees room for improvement in some areas. This assessment is necessarily preliminary given that ESMA reviewed the 2015 proxy season only, the first following the adoption of the Principles by signatories. ESMA’s key findings are:

  • the Principles generally meet ESMA’s expectations;
  • as a result, there is more transparency, so issuers and investors can better understand how proxy advisors operate; and
  • the industry group behind the Principles would benefit from better governance and further clarity over what monitoring it performs. 

The Principles were published by a group of proxy advisors in March 2014 in response to ESMA’s 2013 recommendation to develop a code of conduct to improve investors’ and issuers’ understanding of what they can expect from proxy advisors. ESMA’s recommendation was based on its finding that while there was no clear evidence of market failure in relation to proxy advisors’ interaction with investors and issuers, stakeholders raised a number of concerns regarding the independence of proxy advisors and the accuracy and reliability of their advice.  

ESMA encourages the industry group to address in the coming months the areas it has identified for improvement in its Report.