of the deal, E&Y pointed out the need for more corporate governance services to companies due to the volatility of the markets and changes in regulations. “More than ever, boards need to be aware of shareholder perspectives and meaningfully engage with them,” said Tom McGrath, partner and senior vice chair of markets for Ernst & Young LLP. “This need has increased the demand for the best practice insights Ernst & Young can provide with these capabilities.”
The move by E&Y props up its corporate governance to compete with KPMG’s Audit Committee Institute and the corporate governance practices of Deloitte and PwC. In its release, E&Y points out that its new practice will address such issues as executive compensation, board composition, corporate social responsibility (CSR), and institutional voting policies.
The PGI asset purchase is indicative of further consolidation of the proxy advisory sector – last year MSCI purchased RiskMetrics and beefed up Institutional Shareholder Services (ISS) while The Corporate Library merged with GovernanceMetrics International [See my August 18, 2010 post
] -- but there may be even more changes coming if the U.S. Department of Labor follows through with its proposal to broaden the definition of fiduciaries.
The issue here is that firms like Institutional Shareholder Services and Glass Lewis may come under regulation and be subject to fiduciary duties, such as those that boards and institutional shareholders face. The rules that are being considered by the Employee Benefits Security Administration (EBSA), which would update the definition of fiduciary to more broadly define it as someone who provides investment advice to plans for a fee or other compensation, are expected to be reviewed in September before they are finalized in December, a Pensions & Investments article
[Registration required] quoted Phyllis C. Borzi, the EBSA assistant secretary of labor.
Something to bear in mind is that the DOL originally proposed the new fiduciary rules in October 2010 and has delayed its effective date due to the controversy it has stirred and the many comment letters.
For those of you who were clients of PGI, the firm’s web site has the following message:
For former PGI clients: please note your client-specific data for the period that PGI served as your proxy voting agent has been provided to responsible personnel within your firm and, as applicable, has been provided to your new service provider. If you have questions about your former PGI account environment that cannot be addressed by your new service provider, or for all other inquiries, please call (703) 245-5800 begin_of_the_skype_highlighting (703) 245-5800 end_of_the_skype_highlighting or email email@example.com.
While combing my Twitter and RSS feeds, I came across an item that while not front page news is indicative of a trend I blogged about last summer. That is the demise of Proxy Governance Inc., a 7-year-old proxy advisory and voting firm whose primary assets were purchased by the Big 4 audit firm Ernst & Young and the consolidation of the proxy advisory space.
While the deal closed on Feb. 1, it wasn’t announced until Tuesday for whatever reason. But maybe one of the reasons is that Ernst & Young used the time to hire former PGI staff members and establish its Corporate Governance Group. As part of the deal, E&Y purchased a research application and database of corporate governance information.