View all services
Proxy advisors – Policy and other updates (Australia)

10 February 2022

Proxy advisors – Policy and other updates (Australia)

On Friday, 17 December 2021, Treasurer Josh Frydenberg issued a media release announcing a reform on proxy advisors in Australia. The reform aimed to ‘strengthen the transparency and accountability of proxy advice services, and improving the disclosure of superannuation funds’ voting records on company resolutions’ through the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021.

Specifically, the reform required the four proxy advisors – ACSI, Glass Lewis, ISS and Ownership Matters, to :
  • Renew their Australian Financial Services License (AFSL) to include a greater range of activities by 7th February 2022;
  • Provide a copy of their recommendations to companies on the same day they are provided to investors, effective from 7th February 2022 ; and 
  • Demonstrate independence from their institutional clients, effective from 1st July 2022.
In addition, from July 2022, superannuation funds exercising voting rights on behalf of their members would be required to disclose more detailed information on their voting records in a way ‘that is consistent across the industry’.

Some proxy advisors have responded via media releases. In ACSI’s statement, CEO Louise Davidson pointed out that the reform announcement ‘’follows a process lacking in any transparency, with the Treasurer refusing to engage with proxy advisers, or even to release submissions made months ago to its consultation process until this morning [17th December 2021].” She also highlighted that legislative protections are already in place to support quality advice, such as legislation requiring superannuation funds to act in members best financial interests and robust competition protections. 

As of 7th February, the two global proxy advisors, Glass Lewis and ISS, confirmed that they were granted application for variation of AFSL under these new regulations. 

Only three days later, on 10th February, the Senate vetoed these regulations in full, meaning they are no longer in effect. 

Regardless of this outcome, proxy advisors will continue analysing listed company disclosures and governance. The following section provides a summary of their policy updates for 2022:


First Nations peoples: According to international standards, companies have a responsibility to respect the rights and cultural heritage of First Nations people. Failure to do so can carry a significant human and social cost. Companies can face financial costs, through reputational damage, production implications, project delays, litigation, poor retention and engagement of employees, and physical damage where conflict arises. ACSI’s new policy on engagement with First Nations peoples highlights the material financial risks companies and investors face as a consequence of poor engagement and cultural heritage practices and provides guidance on good practice. ACSI expects companies to engage in good faith and work to build constructive, fair and long-term relationships with First Nations people. ACSI’s Company Engagement with First Nations People policy can be found here -

Climate: Where companies face material climate-related risks, ACSI expects companies to adopt a science-based risk assessment and reporting framework in the Financial Stability Board’s Taskforce on Climate-related Financial Disclosure (TCFD). ACSI expects companies to demonstrate how they are integrating these risks and opportunities into their governance, strategy and risk management processes. In line with ACSI’s Climate Change Policy, where companies consistently fall short of ACSI’s expectations, ACSI may recommend against directors on a case-by-case basis, focusing on the individual directors most accountable for oversight of climate-change related risks (e.g. Chairs, Chairs of the Risk and Sustainability committees or similar). ACSI supports the provision of a ‘Say on Climate’ whereby companies that are materially exposed to climate risk provide investors with an advisory vote on the company’s management of climate-related risks and opportunities. Where a company has adopted a ‘Say on Climate’, this will be the primary focus for ACSI’s engagement and analysis.

Sexual harassment: New information on sexual harassment draws on ACSI’s research and outlines expectations that companies proactively prevent and respond effectively to sexual harassment. ACSI expects visible leadership from the board and senior management, to create a culture of trust and respect. Directors must prioritise and embed good company culture within their organisations, and act immediately where there are instances of misconduct or unethical behaviour, but also establish systems for proactive risk identification and mitigation. 

Modern slavery: More detailed guidance on meaningful action and disclosure in relation to modern slavery has been included in ACSI’s guidelines. ACSI believes that each company will face a different set of risks and opportunities, which is why it is important for companies to have robust processes to identify, prevent, respond, assess and disclose adverse human rights impacts and modern slavery risk. ACSI expects companies to implement mechanisms to avoid causing or contributing to adverse human rights impacts and modern slavery in their own operations, and understand and mitigate the risks of adverse human rights impacts and modern slavery in their supply chains.

Diversity: ACSI guidelines reinforce the importance of diversity (of all forms) and promoting a workforce that reflects the diverse demographic and society in which a company operates. ACSI encourages companies to advance gender diversity at executive level and to disclose the actions that they are taking to achieve this, by:
  1. Pledging to achieve gender balance (40:40:20) in executive leadership by 2030.
  2. Declaring measurable medium and long-term gender targets for 2023 and 2027.
  3. Making the plan public.
  4. Reporting annually on performance against targets. 
For ASX300 boards with one or zero women directors, ACSI will recommend a vote against at least one of (i) the Chair of the board; (ii) the Chair of the Nominations Committee; (iii) a member of the Nominations Committee or (iv) the longest-serving director seeking re-election.

Where a company has zero women directors, ACSI may also make recommendations to vote against any newly appointed male directors.
ACSI also included a section on racism and other forms of discrimination, which states the importance of establishing a safe and inclusive working environment for all. 

Virtual technology use at AGMs: ACSI supports hybrid model for AGMs and has an expectation that the use of technology should not compromise shareholders’ ability to actively participate in AGMs.

You can download the ACSI’s Governance Guidelines here - 

Glass Lewis:

Conflicts of Interest arising from Related Party Transactions (RPTs): Previously, Glass Lewis applied an absolute dollar threshold approach to determine if a Non-executive Director’s (NED) RPT is material. Going forward, they will evaluate materiality by comparing the value of the NED’s RPTs against NED fees. If the value of any professional or consulting services provided directly by the NED exceeds 30% of NED fees, the RPT will be considered material and the NED will not be considered independent. Where transactions of any nature are made with an entity at which the NED has an interest, the RPT will be considered material if they believe the NED’s beneficial indirect interest in the transaction can plausibly exceed 30% of NED fees. 

Diversity: If a company board with six or more directors (including the MD) has less than two women directors, Glass Lewis may consider recommending shareholders vote against board members. Similarly, if a company board has five directors, they expect to see at least one director that is a woman.

ESG Initiatives: Beginning in 2022, Glass Lewis will note as a concern when boards of companies in the Russell 1000 index do not provide clear disclosure concerning the board-level oversight afforded to environmental and/or social issues. For shareholder meetings held after January 1, 2022, GL will generally recommend voting against the governance committee chair of a company in the S&P 500 index who fails to provide explicit disclosure concerning the board’s role in overseeing these issues. 

Glass Lewis maintains concerns relating to the Say on Climate vote on the basis of shareholders approving a company’s business strategy, particularly given that sufficient information to fully evaluate the plan is often not available to shareholders. Accordingly, Glass Lewis will generally oppose shareholder proposals requesting that companies adopt a Say on Climate vote. When companies have adopted such a vote, and are asking shareholders to weigh in on their climate-related strategies, Glass Lewis will evaluate companies’ climate transition plans on a case-by-case basis, considering companies’ disclosure of the board’s role in setting company strategy in the context of the Say on Climate vote as well as disclosure on how the board intends to interpret the vote results and its engagement with shareholders on the issue. In addition, Glass Lewis will evaluate each climate transition plan in the context of each companies’ unique operations and risk profile.

Glass Lewis does not maintain a policy on the inclusion of ESG metrics or whether these metrics should be used in either a company's short- or long-term incentive program. Where E&S metrics are included, as determined by the company, GL expect robust disclosure on the metrics selected, the rigor of performance targets, and the determination of corresponding payout opportunities. 

Glass Lewis’ policies for Australia can be found here -


Diversity: ISS will generally vote against the chair of the nomination committee or chairman of the board (or other relevant directors on a case-by-case basis) if the company is a large Australian listed entity and included in the S&P/ASX300 Index, and the board does not comprise at least 30% percent female representation. For any company, ISS will recommend against when there are no women on the board. 

AGMs: ISS supports proposals which allow the company to convene hybrid shareholder meetings, but recommends against proposals that will permit the company to convene virtual-only shareholder meetings. ISS will also recommend against proposals where the proposed wording in a company's amended constitution is ambiguous, and nevertheless creates an ability for the company to convene virtual-only meetings outside exceptional circumstances.

ISS’ policies for Australia can be found here:
Download now
For further inquiries
Contact us
Contact us

Please complete this form to be contacted by a Morrow Sodali representative.