The Justice Department’s Antitrust Division has made a significant move by withdrawing a 1987 Business Review Letter that was issued to Institutional Shareholder Services (ISS), a prominent proxy advisory firm. This decision directly impacts ISS and Glass Lewis, the two major players in the proxy advisory market, controlling over 90% of the market share. ISS and Glass Lewis wield substantial influence in corporate governance matters, advising clients on how to vote on thousands of corporate governance issues each year. With their significant ownership stake in the largest publicly traded companies in the US, ISS and Glass Lewis shape the policies of these corporations based on their market dominance. The withdrawal of the 1987 Business Review Letter raises questions about the future operations and influence of these proxy advisory firms in the corporate governance landscape.
The Justice Department’s action comes amidst increasing scrutiny of the role of proxy advisory firms in corporate decision-making. Proxy advisory firms like ISS and Glass Lewis play a crucial role in providing recommendations to institutional investors on how to vote on important issues at shareholder meetings. However, concerns have been raised about the potential conflicts of interest and lack of transparency in their decision-making processes. The withdrawal of the Business Review Letter could signal a shift in how these firms are regulated and could lead to increased oversight and scrutiny of their operations.
The practical consequences of the withdrawal for ISS and Glass Lewis remain to be seen. It is possible that this move could result in increased competition in the proxy advisory market as new players enter the space to fill the void left by ISS and Glass Lewis. Additionally, companies may need to reevaluate their relationships with proxy advisory firms and consider alternative sources of corporate governance advice. The withdrawal of the Business Review Letter could also have implications for the broader corporate governance landscape, as companies may need to adapt to new regulatory requirements and standards.
It is unclear what the next steps will be for ISS, Glass Lewis, and other proxy advisory firms in light of this development. The Justice Department’s decision to withdraw the 1987 Business Review Letter marks a significant shift in the regulatory environment for proxy advisory firms and could have far-reaching implications for the industry. Companies and investors will be closely watching how this situation unfolds and what it means for the future of corporate governance in the US.
