NEW YORK (AP) - Ontario Teachers' Pension Plan bought the proxy adviser Glass, Lewis & Co. Friday for $46 million from troubled Xinhua Finance Limited of Shanghai, a move that puts the world's No. 2 proxy advisory firm in the hands of the governance-focused $106 billion Canadian pension fund.
Ownership by Xinhua, which has been buffeted by governance and financial problems, had been a source of embarrassment and staff departures at Glass Lewis, which advises shareholders about how to vote on corporate proxy issues concerning governance matters including takeover provisions, board rules and executive pay.
The Ontario pension plan, a client of Glass Lewis, framed their purchase in terms of saving the independence and credibility of the firm.
'The investment in Glass Lewis ensures that investors will have an impartial, expert source of information on corporate governance, accounting and legal issues at public companies for years to come,' said Brian Gibson, senior vice president, public equities at the pension plan.
Glass Lewis, which was purchased by Xinhua in January, has been looking for a buyer for months. RiskMetrics Group, which owns the world's largest proxy adviser, ISS Governance Services, was rumored to be considering buying Glass Lewis.
The newsletter Global Proxy Watch, written by governance consultant Stephen Davis, first reported last month that the Ontario Teachers' Pension Plan was bidding against RiskMetrics.
Ontario Teachers' Pension Plan had dropped rival proxy firm ISS over conflict of interest concerns, according to the newsletter. The pension's plan chief executive, Claude Lamoureux, has long warned against conflicts of interest among proxy voting vendors and credit rating agencies.
Sarah Cohn, a spokeswoman for ISS parent RiskMetrics, said, 'We never comment on clients, past or present.'
Commenting on the sale, Cohn added, 'We believe in a dynamic proxy advisory marketplace where choice is important and firms compete on the merit of their own services and the ultimate value they deliver to investors.'
A spokeswoman for the Ontario Teachers' Pension Plan did not immediately return calls; many Canadian businesses were closed Friday for the country's Thanksgiving holiday.
The Ontario pension plan will not be involved in day-to-day management of the company and Glass Lewis' operations will remain separate from Teachers, the pension plan's Gibson said. Instead, the plan will work on strategy at the board level. Glass Lewis will continue to market its research and proxy voting services internationally.
Xinhua Finance, which reportedly paid nearly $40 million for Glass Lewis, has been roiled by troubles since its public offering in March, with its stock slumping well below its IPO price.
Two marquee Glass Lewis employees resigned in late May when Barron's reported that Xinhua Finance Media Ltd.'s former chief financial officer, Shelly Singhal, ran a brokerage firm during his tenure that had been under a cease-and-desist order from the National Association of Securities Dealers since 2006, as regulators sought a suspension. The paper also reported that Singhal was fighting a private civil racketeering suit in California courts for his investment activities.
Xinhua Finance Media is a subsidiary of Xinhua Finance. Singhal was a board member of both companies. The order and civil suit were not mentioned in the company's IPO prospectus in March.
Resigning over the matter were Glass Lewis' head of research, Lynn E. Turner, former chief accountant for the Securities and Exchange Commission, and its managing director and research editor, Jonathan Weil, a former Wall Street Journal reporter.
According to Barron's, Weil wrote in his resignation letter that he was 'uncomfortable with and deeply disturbed' by Xinhua's conduct. 'To protect my reputation, I no longer can be associated with Glass Lewis or Xinhua Finance,' he wrote.
A call to a Glass Lewis spokeswoman to see if either man might return following the company's purchase was not returned.
Xinhua has been trying to shore up its finances and last week said The Yucaipa Cos., a U.S. investment firm where former President Bill Clinton is a senior adviser, had taken a stake the company. It also added four new board members.
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