US DOJ Raises Antitrust Concerns Over Proxy Advisory Firms

The US Department of Justice (DOJ) has withdrawn a 1987 guidance that had cleared the business practices of Institutional Shareholder Services (ISS), one of the country’s two major proxy advisory firms.

Proxy advisers help large investors, including mutual funds and pension funds, decide how to vote on matters such as company Directors, executive pay and Corporate Governance.

The DOJ said it withdrew the earlier guidance because the proxy advisory sector has become concentrated, with ISS and Glass Lewis controlling a large share of the market. The department is now examining whether their influence raises antitrust concerns. The move follows calls from US President Donald Trump for greater scrutiny of the two firms. Regulators and political groups have also raised concerns about their influence over corporate decisions and their support for environmental, social and governance (ESG) proposals.

The DOJ also said ISS’s business has expanded since 1987 and now includes advising companies on executive pay and governance, beyond its original focus on investors.