4.8 Proxy Advisors

In order to fulfill voting obligations responsibly and efficiently, many pension funds make use of the services of proxy advisors or proxy firms.

The institutions that are primarily concerned here are pension funds that hold a large number of Swiss shares either directly or through a single investor fund – irrespective of the size of the fund. While smaller institutions often lack the resources to make a decision, larger institutions are interested in basing their voting decisions on the soundest information possible.

The legal expert Mariel Hoch defines the term as follows: «Proxy advisory is the fee-based consultation provided to institutional investors when exercising their voting rights at annual general meetings of listed companies. Proxy advisors perform this consultative function by issuing specific recommendations (FOR or AGAINST, rarely ABSTAIN) on the individual items on the agenda of an annual general meeting, where they do not take the individual interests of the investors into consideration. The recommendation and related argumentation are based on internal guidelines of the proxy advisor and are provided in report form.»ⁱ

It is generally thought that every third vote at the annual general meeting of a Swiss company with a broad shareholder base may well be influenced by proxy advisors. Domestic and foreign service providers are active on the proxy advisory market. The most important are ISS (➔ issgovernance.com), followed by Glass Lewis (➔ glasslewis.com). The Swiss  providers,  namely Ethos  (➔ ethosfund.ch) and zRating (➔ inrate.com), are smaller but in exchange are very familiar with the local regulatory conditions. A good article on ISS can be found in Bilanz, see  ➔ bilanz.ch/unternehmen/ stimmrechtsberater-iss-so-tickt-dieaktionaers-polizei-902708.

It is worth seeking contact with proxy advisors in the context of the continual Investor Relations and especially in the case of capital market transactions or delicate annual general meetings. IR has to recognize their needs and also the areas of tension where there may be a significant divergence of views on the part of the company and the proxy advisors. At present, this for example affects the speed at which gender quotas and climate targets are implemented. Increased scrutiny is also being applied to the appointment of members of boards of directors as well as CEO remuneration. The German professional IR association DIRK has moreover published an excellent guide on dealing with proxy advisors that includes good portraits of the most important actors, see ➔ dirk.org/wp - content /uploads/2020/11/ IR- Guide- Proxy-Advisor_FINAL.pdf (in German only)