There’s something a bit awkward about being a regulator or watchdog which has profit as its primary focus. The ASX has struggled to deal with this obvious conflict for the past decade and now we’re seeing an interesting debate about the ownership of the world’s proxy advisory firms.

Proxy advisors are the new governance kingmakers in the Australian market. They tell institutional shareholders how to vote their shares and have the power to severely embarrass corporate boards.

Rio Tinto learnt about this the hard way last year when a recommendation by the world’s biggest proxy advisor, Institutional Shareholders Services, defeated a proposal for a new constitution. Similarly, fabulous shareholder returns didn’t stop the proxy advisors triggering huge 40%-plus protest votes against the Zinifex and Oxiana Resources remuneration reports last year.

ISS has strengthened its presence in Australia since buying the local outfit Proxy Australia from Dean Paatsch and Melbourne University’s Professor Geof Stapleton in 2005.

The other local player is a firm called Corporate Governance International, run by former corporate lawyer Sandy Easterbrook, which was sold to aggressive US proxy advisor Glass Lewis last year.

However, Glass Lewis itself sold to a colourful Chinese company Xinhua Finance Media last year which has now triggered some high profile resignations, as this International Herald Tribune report explains.

After Barron’s broke the story about dodgy corporate governance and poor disclosure last week, Xinhua immediately copped a shareholder class action, as this press release explains.

CGI led the charge against Rupert Murdoch during the governance debate associated with News Corp’s move to America and you can only imagine what the News Ltd hacks would have written at the time had CGI been embroiled in its own governance scandal.

ISS has also recently been sold again and its new owner, Risk Metrics, is moving towards a public float which has raised press speculation about potential conflicts.

As a shareholder activist, it would be great fun to attend the AGMs of both companies and fire off some questions about corporate governance.