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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.


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."

 

 
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