Ever since the world’s most powerful proxy advisory business, RiskMetrics, bought the boutique Melbourne-based operation Proxy Australia three years ago, there has been a major sea change in institutional voting Down Under.

This is largely due to a donkey vote that RiskMetrics, which is a $US1 billion company listed on the New York Stock Exchange, seems to have with its offshore institutional clients.

The key performance indicator for a proxy voting adviser is whether its clients follow the advice and that has happened in spades in Australia with RiskMetrics over the past three years.

Heaven forbid, even I suddenly got 70% of the independent vote in favour at Centro Retail’s AGM last November when RiskMetrics gave its first endorsement to an outside Australian candidate. It was a Stephen Bradbury endorsement where RiskMetrics had been calling for independent directors for years, billions had been lost and no-one else nominated.

The roll call of RiskMetrics’ victims is long indeed with the Allco Finance Group directors Barbara Ward (42% against at Qantas), Sir Rod Eddington (35% against at Rio Tinto) and David Clarke (withdrew with defeat imminent at AMP) the best recent examples.

However, something strange happened at RiskMetrics when it came to taking on the Lowy family at Westfield.

The firm’s local boss Dean Paatsch went on the SBS Insight program last month and explained that his “against” recommendation at Boral last year, which caused an embarrassing defeat, was because $5 million in cash for CEO Rod Pearse was too much when profit was down by 19%.

So how on earth can RiskMetrics recommend in favour of the Westfield remuneration report at Wednesday’s AGM when the Lowy family have ripped out more than $30 million in salary during a year when the share price almost halved?

The arguments against Westfield’s pay policies are pretty straight forward and were laid out in this Fairfax online article on March 30. Sadly, RiskMetrics have dogged it. Frank Lowy must be too big to take on.

The major competitor to RiskMetrics, CGI Glass Lewis, has recommended against the Westfield remuneration report because the ridiculously large short term cash bonuses — $7 million to Frank and $4 million each to Steven Lowy and Peter Lowy — are just too big and not properly explained.

The AFR’s property editor Robert Harley, who went to school with one of the Lowy sons, has long been soft on the Lowy family and there was another classic example in today’s feature interview complete with a front page picture.

The pay issues were barely covered — let alone criticised — and we even had Frank speaking in favour of Rudd Bank for property. Surely the government couldn’t bail out Australia’s most overpaid executive?

Now that Macquarie CEO Nicholas Moore has cut his overall pay by almost 99% to just $290,000, it leaves Frank Lowy swinging in the breeze as the highest paid Australia after actually increasing his pay packet from $15.8 million in 2007 to $16.2 million in 2008.

Yet it seems those who should be pointing this out and leading the charge for change are not up to the job.

Watch Dean Paatsch, the Australian head of RiskMetrics, speak on governance and voting in these two videos.

Peter Fray

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