US Justice Department Withdraws Longstanding Antitrust Guidance for Proxy Adviser

Reuters reported that the Justice Department rescinded a 1987 letter in which it had concluded that ISS’s planned business model did not raise antitrust concerns at the time. The department now says developments in the proxy advisory industry and changes in ISS’s operations have prompted it to revisit that conclusion.

According to Reuters, President Donald Trump has called for an antitrust investigation into ISS and Glass, Lewis & Co., the two firms that dominate the market for proxy advisory services. The companies provide voting recommendations and corporate governance analysis used by mutual funds, pension funds and other large institutional investors when casting ballots in shareholder elections.

Reuters reported that when ISS sought the Justice Department’s opinion in the 1980s, the company represented that it would advise institutional investors on corporate governance matters without providing guidance related to companies’ commercial operations, including the production, purchase or sale of goods and services.

The Justice Department now contends that description no longer reflects ISS’s business, Reuters reported. The department said ISS has expanded its activities to include advising corporations on issues such as executive compensation and corporate governance, in addition to advising shareholders.

Reuters also reported that an ISS spokesperson did not immediately respond to a request for comment on the department’s decision.

The proxy advisory industry has faced sustained criticism from conservative organizations and Republican lawmakers, who argue that firms such as ISS and Glass Lewis wield significant influence over shareholder voting outcomes. Reuters reported that critics have also challenged the firms’ support for environmental, social and governance-related shareholder proposals.

Source: Reuters