Senate Banking Committee Chairman Tim Scott, alongside colleagues Mike Rounds and Bill Hagerty, has raised concerns regarding the influence of proxy advisors on U.S. public companies’ corporate governance. In a letter addressed to Institutional Shareholder Services Inc. (ISS) and Glass, Lewis & Co., the senators highlighted issues related to transparency, accountability, and oversight as these firms impact public policy on economic, environmental, and social matters.
The letter questions the foundations for the firms’ recommendations, potential conflicts of interest, and their voting policy processes. It notes that “public admissions from your leadership – in congressional testimony and in appearance before national media – reveal that your firms routinely issue vote recommendations… without any underlying economic analysis.”
Concerns were also raised about conflicts of interest due to ISS’s dual role as both a proxy advisor and governance consultant. The senators stated that this setup “incentivizes companies to purchase expensive consulting services from ISS to secure favorable voting recommendations.”
Further scrutiny was directed at foreign ownership influences. ISS is primarily owned by Deutsche Börse, which emphasizes sustainable initiatives. Glass Lewis is owned by Peloton Capital Management, known for prioritizing ESG factors.
The letter also criticized a lack of transparency in proxy recommendations. It noted partisan patterns in ISS’s recommendation history: “ISS did not recommend a vote in favor of even one environmental, social, or political shareholder proposal submitted by a conservative proponent” in recent years.
Additionally, the senators pointed out what they see as prescriptive practices related to board diversity mandates by ISS and Glass Lewis.
To access the full letter from the Senate Banking Committee members, further information is available online.
