The Federal Trade Commission, namely America’s Antitrust, has turned its attention to proxy advisors ISS and Glass Lewis. According to the Wall Street Journal, the FTC is investigating whether the companies violated antitrust laws through their activities in directing investor votes on climate and ESG issues. The investigation is the latest step to put pressure on two of the biggest names in the industry, which managers rely on for research, analysis and recommendations to provide a voice to shareholders on issues ranging from executive compensation to board elections. Iss and Glass Lewis effectively form a duopoly in advising institutional investors on corporate governance issues. Their influence over voting has waned and large asset managers have been quick to say they are calling the shots themselves. But smaller advisors continue to rely on them to help them navigate thousands of corporate voting decisions. The FTC’s goal is to verify whether “unfair competition methods” have been adopted and follow up on an investigation launched this spring by the House Judiciary Committee, which is led by Republicans. The White House is also discussing at least one executive order that seeks to limit the influence of proxies on shareholder votes. Elon Musk also recently complained, calling ISS advisors “corporate terrorists” because they had recommended that Tesla investors reject the $1 trillion compensation package (the compensation plan was then approved last week). Some Trump administration regulators, including Securities and Exchange Commission Chairman Paul Atkins, have in the past called for tighter oversight of voting consultants.
In a letter sent to ISS in March, Republican lawmakers said that ISS and Glass Lewis “collaborate with environmental activists to impose environmental, social, and governance (ESG) goals on US companies.” Therefore, pressure is mounting to discuss a possible executive order that would block proxy activity.
