Australian listed companies are set to come under greater scrutiny from global investors after the giant of international proxy advising, Institutional Shareholder Services, agreed to buy Melbourne-based Proxy Australia yesterday.

Proxy advising first appeared on the Australian radar in 1995 during Coles Myer’s Yannon controversy, and has since grown to support two competent firms – Corporate Governance International in Sydney, which is led by former corporate lawyer Sandy Easterbrook, and Proxy Australia in Melbourne which is run by Professor Geof Stapleton and Dean Paatch.

Each firm has collaborated with ISS over the years, the best example being with the News Corp move to America last year which saw ISS demonstrate its global clout by backing the local advisory firms and forcing Rupert Murdoch into an embarrassing backflip. But with globalisation on the rise, the question was always whether ISS would set up shop on its own in Australia or buy one of the two incumbents in what is a growing market as institutions slowly start to take their voting responsibilities more seriously.

The purchase of Proxy Australia means that Australian companies will face greater scrutiny because Proxy Australia’s voting recommendations and reports can now be sent around the global ISS network.

ISS is the recognised industry leader with 20 years of corporate governance experience and it has 1,300 institutions worldwide as clients, representing more than $33 trillion of the world’s equity. While the two Australian governance firms each have fewer than ten staff, ISS has 400 employees with offices in Maryland, New York, Chicago, Toronto, London, Tokyo, Manila, Brussels, Paris, Amsterdam and now Melbourne.

Let’s hope this deal will further raise the profile of corporate governance and shareholder power as we gear up non-binding votes on remuneration reports.