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votes and part of that has to do with proxy advisers. But to say proxy adviser regulation is going to improve the process — it's a small piece of a very big process." At a recent presentation at the TSX, Makuch says Glass Lewis indicated 80 per cent of its clients have their own proxy voting guideline. That means they're not relying on them entirely. For its part, ISS has indicated upwards of 60 per cent of the assets it represents have their own voting guidelines. Makuch points out there is also an industry code of conduct all proxy advisers are working on that shows they are interested in addressing issues before the regulators do. "These people doing proxy advisory work are very smart people," he says. "They're not sloughing off comments and possible calls for regulation. I think they're looking for an industry code of conduct." While most admit there are weaknesses with the process, a decent remedy might be greater disclosure to make everyone feel more comfortable with it. "I think there's always a need for accountability in the public market and I think that's why originally this push came to the commission as opposed to some legislation," says David Salmon, senior vice president with Laurel Hill Advisory Group in Vancouver. "They're private firms and you ultimately subscribe or don't subscribe. If the service is good, you're going to continue to subscribe. Perhaps there needs to be specific disclosure." For its part, ISS, which declined to be interviewed for this story, said in its submission to the CSA it has policies in place for when errors occur and has the ability to rectify them. The challenge, says Salmon, is they aren't always rectified. Tuzyk says most issuers would be happy if there was an established process for the review of proxy reports so factual inaccuracies could be addressed. A close second would be greater transparency in the rules and methodologies applied so they don't have to buy the service in order to get a favourable recommendation. So what will come of the debate around the proxy companies? It's unlikely the CSA will get out ahead of the SEC so it could take some time yet before something substantial actually happens but the discussion thus far has been viewed by all to be positive. "I think they are worried because this is crystalizing right now," says Leblanc. "These are big firms and their up or down recommendations on various corporate governance items have significant effect — particularly if activist investors look to ISS for their recommendations. It's in everyone's interest that the recommendation be grounded, be empirically based, and transparent. These are all good governance practices and the proxy advisory firms need to open up the kimono and err on the side of abundance of caution." Feldman of Goodmans agrees. "I get the sense the CSA is ragging the puck a little bit on this one because I think there isn't a clear answer. There may be some push for better disclosure of the process, of people to understand how the proxy advisers came to their conclusions — I don't know what increased regulation is going to get us — I don't see the benefit." IH lerners 1/2 island Absolute professionalism and respect for you and your client relationships, and the tenacity required to go the distance in pursuit of the best possible outcome. Absolute professionalism and respect for you and your For proven experience in class actions, count on Lerners. client relationships, and the tenacity required to go the distance in pursuit of the best possible outcome. Contact our London or Toronto office today and turn our experience to your advantage For proven experience in class actions, count on Lerners. Contact our London or Toronto office today and turn our experience to your advantage London: 519 672 4510 Toronto: 416 867 3076 www.lerners.ca w w w. c a n a d i a n law y er m a g . c o m / i n h o u s E ntitled-1 1 april 2013 • 31 13-02-26 3:21 PM

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