Study on Proxy Advisor Recommendations for Auditor Ratification

This research article examines the influence of proxy advisor recommendations on auditor ratification votes among larger public companies. The study, titled 'Auditor Ratification: Can’t Get No (Dis)Satisfaction,' conducted by Professor Lauren Cunningham, analyzes 9,003 auditor ratification votes from 2009 to 2012, focusing on the recommendations made by Institutional Shareholder Services (ISS) and Glass Lewis. The findings indicate that negative recommendations from proxy advisors do affect dissenting votes on auditor ratification, but to a lesser extent than in other areas such as director elections and executive compensation. The article also discusses the criteria under which proxy advisors issue Against recommendations, noting that concerns about auditor independence lead to more negative recommendations than concerns about audit quality. The study suggests that increased disclosure regarding audit quality could enhance the decision-making process for institutional investors, although it does not provide formal recommendations. The author highlights a trend toward voluntary audit committee disclosures that may address some identified concerns.