House Investigates Proxy Advisory Firms Over Antitrust Concerns

The House Judiciary Committee launched an investigation of ISS and Glass Lewis at the end of March, over concerns regarding market power and antitrust violations.

What happened: The House Committee sent letters to the CEOs of both proxy advisors, claiming to have uncovered evidence of “a duopoly…to collude with environmental activists to impose radical ESG goals on US companies.”

• The Committee is requesting a plethora of documents dating back to 2021, including correspondence between ISS and Glass Lewis, ISS and its corporate consulting business, and anything relating to integrating each other’s proxy recommendations into the proxy voting platforms.

• The demands also call for the list of companies receiving consulting services, the recommendations for those companies and the list of companies receiving “against” recommendations.

• According to the Committee, ISS and Glass Lewis may be running afoul of antitrust laws by leveraging their influence to gain a competitive advantage over others in the market.

Meanwhile, the Center (in conjunction with the U.S. Chamber of Commerce and Business Roundtable) filed an amicus curiae brief in defense of the beleaguered 2020 SEC proxy advisory oversight rules.

• The SEC passed a moderate set of Center-supported reforms to proxy advisors in 2020 and was immediately sued by ISS. Although the rules have since been suspended, ISS maintains the suit, which has been bogged down in court for years at this point.

• Regardless of the outcome of the suit, Congress is likely to pursue legislation mandating further oversight of proxy advisors (see the Center’s op-ed on this here).

Bottom line: HRPA has long advocated for proxy reform both in Congress and through support of the SEC’s 2020 rules. It is time to finish the job on reasonable proxy advisory reform—either through reinstating the 2020 rules or through new legislation or regulation.