FTC Launches Antitrust Probe of ISS, Glass Lewis

The Federal Trade Commission has opened an antitrust investigation into Institutional Shareholder Services (ISS) and Glass Lewis, The Wall Street Journal reports.

The FTC is examining whether the two dominant proxy advisory firms have engaged in practices that violate competition laws, according to people familiar with the matter.

The inquiry marks the latest challenge for the proxy advisor firms, whose analyses and voting recommendations heavily influence how investors cast ballots on key corporate matters — from board elections and executive pay to proposals on environmental and social issues.

Sources said the FTC’s early-stage probe is scrutinizing how the companies compete and whether their guidance to clients on contentious shareholder resolutions may amount to “unfair methods of competition.”

Glass Lewis confirmed receiving a letter from the FTC in late September outlining the inquiry but declined to comment further. ISS also declined to comment.

The investigation comes on the heels of a separate review launched earlier this year by the Republican-led House Judiciary Committee, which is examining whether the proxy advisers’ work aligns too closely with environmental and social activists.

The White House is reportedly weighing an executive order aimed at curbing the sway of both proxy advisers and large index-fund managers over shareholder votes — a move that would intensify government scrutiny of corporate governance gatekeepers.

For years, business leaders and groups such as the U.S. Chamber of Commerce have accused ISS and Glass Lewis of wielding outsized power and undermining management positions.

Tesla CEO Elon Musk, for example, has called ISS “corporate terrorists” after it recommended shareholders reject his record-breaking pay package — a proposal investors ultimately approved.

The firms’ influence has diminished somewhat as major asset managers assert more independence, but smaller institutional investors continue to depend on their research to navigate thousands of proxy decisions each year. Together, ISS and Glass Lewis maintain an effective duopoly over the market for corporate-governance advice.

Civil antitrust cases typically focus on whether a company’s dominance harms customers by driving up costs or limiting choice. However, the FTC can also pursue cases under its broader authority to police “unfair” business practices, a standard the agency has sought to use more aggressively in recent years.

House Republicans have accused ISS and Glass Lewis of “colluding with environmental activists” to advance ESG-related policies and have requested internal communications between the firms.

Meanwhile, administration officials are said to be discussing broader reforms to shareholder rules, including raising the ownership thresholds for submitting proposals and reducing the frequency of corporate earnings reports — changes supported by many corporate executives.