(Bloomberg) -- Australia is seeking to curb the influence of activist investors that force firms to battle climate change and hire more senior women by adopting similar laws imposed by the Trump administration last year.
So-called proxy advisory firms that consult with the nation's biggest shareholders on corporate governance will be required to have a financial services license and prove they're independent of their clients, according to a government statement Friday. They'll also have to disclose their voting advice to target companies on the same day that it's given to clients.
Australia's advisory market is dominated by four firms that exert significant influence on votes at annual meetings, including among pension funds which collectively own about a fifth of the nation's stock market. The companies, which include Australian Council of Superannuation Investors and Institutional Shareholder Services, can determine whether activist campaigns succeed because investors often follow their recommendations in board elections.
It is “important that proxy advice is transparent, independent and its quality and accuracy can be relied upon by investors and companies alike,” said the joint statement from Treasurer Josh Frydenberg and Minister for Superannuation Jane Hume.
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The regulations mirror those imposed by the Trump administration in 2020 after persistent lobbying from groups like the U.S. Chamber of Commerce that argued proxy firms are conflicted and should be more aggressively regulated. The rules are now being scrapped by the Biden administration after investors expressed concern they made it harder for shareholders to hold companies to account for poor performance.
Still, the regulations are finding favor in Australia as lawmakers fret over pension funds' increasing influence across a range of issues from climate change mitigation to greater gender equity on company boards. Lawmakers have started an inquiry into the concentration of stock ownership in Australia, fearing investors could impose a policy agenda that bypasses the voting public, like forcing banks to crimp coal and other fossil fuel financing.
“Pushing through regulations with no consultation just before Christmas undermines the principle of transparency that the Treasurer claims to uphold,” Louise Davidson, chief executive officer of ACSI, said in a statement. “This appears to be a deliberate attempt to sidestep the parliamentary process to avoid proper scrutiny and is an insult to the Senate and millions of superannuation fund members.”
The licensing extension and the requirement to provide copies of proxy advice to companies will commence from Feb. 7, while new independence and superannuation voting disclosure requirements will start from July.
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