The unusual demand from institutional investors: report all your votes from the last 3 years

The Capital Markets Authority is signaling its next target - the voting of institutional bodies at public company meetings. This comes after the Authority recently intervened in the issue of car insurance and forced insurance companies to "align" and stop price increases (and even lower them), after it began examining the issue of commissions for insurance agents and management fees, and last week published a new draft regulation also regarding discounts in life insurance (insurance for death cases).

It has come to the attention of Globes that all institutional bodies recently received a request from the Capital Markets Authority, headed by Amit Gal, to provide it with data on all their votes at general meetings of public companies carried out during the last 3 years, starting from August 2023 until the end of July this year.

This involves hundreds of votes for each body, meaning a lot of work for those institutions, and the move has aroused surprise and resentment in some of the bodies, since the market does not remember when the Authority last conducted an audit of votes at meetings, and as far as is known, such an event has not occurred for years.

In the Authority, they demand that the institutional bodies transfer to them by September 2nd data on all votes, and on the corporate governance related to them, and clarify that if the bodies wish to receive an extension, they must coordinate it with them.

What is the Authority looking for?

In the Authority's request, it is written that the institutions must transfer to it detailed documentation of the date of each meeting, with the name of the public company, what was the subject of the vote, who initiated it, what was the majority required in the vote, whether the controlling shareholder was prevented from voting, the rate of the body's holding and its identity (pension savings, funds, etc.). And also: the name of the recommending consulting company, whether the vote contributed to policy, whether there was a conflict of interest, what were the results of the vote at the meeting, the actual percentage of opposition, percentage of support, percentage of abstentions and whether the decision was accepted.

Perhaps the most interesting point that the Authority wants to see is whether the institutional body initiated or promoted an active move against the held company and whether there are votes in which the institutions did not vote, even though they are required to do so, which would raise a suspicion of a violation.

In the Authority, they also specify in the information request not to change the file structure, not to make changes to the name of the sheets or columns, and if a certain field is not relevant, to indicate "not relevant" or that the information "does not exist" or "was not documented".

Hundreds of votes for each body

This is quite a bit of work for the institutional bodies, certainly in the month of August when quite a few of the employees are on vacation. According to estimates, as mentioned, each body will have to transfer documentation of hundreds of different votes.

It also became known to Globes that in order to meet the Authority's target, the institutions turned to "Amda", a body that advises them on how to vote at company meetings, for example on executive compensation issues, to receive the data. Which may help them in performing part of the task, but in other votes they will have to manage on their own.

It must be said, it is the right and perhaps even the duty of the Capital Markets Authority to supervise the institutions that manage public funds in the amount of 3.5 trillion shekels.

Savings bodies became giants following the Bachar Committee in 2005 which separated savings funds from banks, in addition to the mandatory pension law and other savings contributions such as training funds, in amounts of hundreds of billions of shekels per year.

Institutions that manage huge funds influence the Israeli capital market dramatically. They are at the decision-making junctions of companies and vote on a variety of events such as, for example, the appointment of directors and compensation, business decisions, mergers and acquisitions, the appointment of an accountant and more. Institutions must balance between being bodies that operate in the capital market and fulfill their functions for the benefit of the savers, their clients, and on the other hand to do so without extraneous considerations.