The U.S. Justice Department has withdrawn guidance issued nearly four decades ago to a major shareholder advisory firm, signaling fresh antitrust concerns over the concentration of power in the proxy advisory industry.
The decision, announced on Wednesday, revokes a 1987 letter that had assured Institutional Shareholder Services (ISS) that its business model did not raise competition concerns under antitrust law. Federal officials now argue that the industry’s structure and the expanding role of proxy advisers warrant a new assessment.
Proxy advisory firms play a significant role in corporate America, helping pension funds, mutual funds and other institutional investors determine how to cast votes on matters ranging from board appointments to executive compensation packages. ISS and Glass Lewis dominate the market, giving them substantial influence over shareholder decisions at some of the country’s largest companies.
President Donald Trump has previously called for an antitrust investigation into both firms, arguing that their recommendations shape the voting behavior of major investors and, by extension, corporate policy.
According to the Justice Department, the circumstances described in the original 1987 opinion no longer reflect the present-day operations of ISS. At the time, the company had told regulators that its services would focus exclusively on advising investors about shareholder resolutions and corporate governance issues, without involvement in companies’ commercial activities.
Federal officials now contend that ISS’s business has evolved considerably. In addition to advising shareholders, the company also offers consulting services to corporations on matters such as executive compensation and governance practices—an expansion that the department says changes the competitive landscape.
ISS, founded in 1985, had originally sought the Justice Department’s assessment to confirm that its advisory model complied with antitrust laws. The company did not immediately comment on the government’s latest move.
Proxy advisers have increasingly become targets of criticism from conservative organizations and Republican lawmakers, who argue that the firms wield outsized influence over corporate decision-making. Their support for environmental, social and governance initiatives has been a particular point of contention, intensifying political scrutiny of an industry that quietly shapes billions of dollars in shareholder votes each year.
