In a bold legal strike, the two dominant forces in proxy advisory—Glass Lewis and Institutional Shareholder Services (ISS)—have launched lawsuits against the state of Texas, aiming to halt a new law they argue muzzles financial voices under the guise of ideology.
Filed in federal court in Austin, the suits accuse Texas of trampling on First Amendment rights with legislation that targets shareholder advice related to diversity, equity, inclusion (DEI), and environmental, social, and governance (ESG) issues. Glass Lewis and ISS contend the law attempts to weaponize state power to dictate what opinions are permissible in boardroom politics.
At the center of the storm is Texas Attorney General Ken Paxton, the law’s enforcer and a Senate hopeful in 2026. He has yet to respond publicly.
The law, signed in June by Governor Greg Abbott, mandates that proxy advisers flag certain guidance as not “solely in the financial interest of shareholders” if it relates to DEI or ESG. It also demands accompanying financial analyses to justify such advice—an unprecedented move that Glass Lewis and ISS argue forces them to act as mouthpieces for state ideology.
The measure, set to kick in on September 1, doesn’t just raise regulatory hurdles—it compels speech, the advisers say. “This law forces us to parrot the state’s political messaging,” their filings assert. “That’s not disclosure. That’s coercion.”
ISS slammed the law as a calculated effort to shield corporate directors and dilute shareholder influence, calling it “an experiment in anti-capitalism.” Glass Lewis, which advises over 1,300 institutional investors, echoed the alarm, saying the law could erode trust, drive away clients, and distort the market’s balance of power.
In 2024 alone, ISS advised on nearly 52,000 shareholder meetings across roughly 2,000 clients—underscoring the enormous reach of the advisers now being told how they can speak.
The broader context? A growing Republican campaign against DEI and ESG initiatives—an agenda now championed by Donald Trump as a pillar of his 2024 platform.
The court battles are now underway: *Glass Lewis & Co v. Paxton* (No. 25-01153) and *Institutional Shareholder Services Inc v. Paxton* (No. 25-01160), both lodged in the U.S. District Court for the Western District of Texas.
The legal war over what can—and can’t—be said in the world of shareholder influence has begun.
