President Trump has joined the Republican assault on proxy advisory companies Glass Lewis and Institutional Shareholder Companies (ISS) over their positions on ESG and DEI, issuing a brand new government order directing a number of U.S. federal companies to extend oversight of the companies, and to analyze them for violating antitrust, unfair competitors and misleading practices legal guidelines.
Within the order, Trump notes that the 2 companies account for greater than 90% of the proxy advisory market, and claims that they “recurrently use their substantial energy to advance and prioritize radical politically-motivated agendas,” particularly highlighting ESG and DEI, with the order together with examples such because the companies’ help for shareholder proposals requiring corporations to cut back greenhouse gasoline emissions or to conduct racial fairness audits.
Trump refers back to the companies as “foreign-owned proxy advisors” that “play a big function in shaping the insurance policies and priorities of America’s largest corporations. San Francisco-based Glass Lewis was acquired by Canadian funding agency Peloton Capital and Chairman Stephen Smith in 2021. Maryland-based ISS was acquired in 2021 by German trade firm Deutsche Börse.
The brand new Govt Order kinds the newest in a collection of actions by anti-ESG politicians within the U.S., which has more and more targeted on the proxy advisory companies previously few months, together with lawsuits and investigations launched just lately by Florida and Texas, and a warning from SEC Paul Atkins of plans to look at and suggest actions targeted on the function of proxy advisory companies over the “weaponization of shareholder proposals by politicized shareholder activists.”
Within the order, Trump directs the SEC, FTC and Division of Labor to extend scrutiny and regulatory management of the companies.
The SEC is ordered to find out if the proxy companies ought to be required to register as Registered Funding Advisers (RIAs), bringing them underneath the regulatory authority of the SEC, and to contemplate requiring the companies to extend transparency on their ESG and DEI suggestions and insurance policies, in addition to to analyze whether or not funding companies’ use of their providers for recommendation on points together with ESG and DEI “is inconsistent with their fiduciary duties.”
The FTC is directed within the order to overview the State-level investigations into the proxy companies and to “decide if there’s a possible hyperlink between conduct underlying these investigations and violations of Federal antitrust legislation,” in addition to to analyze if the companies “interact in unfair strategies of competitors or unfair or misleading acts or practices” that hurt shoppers.
The order additionally directs the Secretary of Labor to overview and revise laws regarding the function of proxy advisors in advising managers of ERISA pension plans, and to take actions to extend transparency round using proxy advisors, with a specific concentrate on ESG and DEI funding practices.
In an announcement offered to ESG In the present day, an ISS spokeswoman stated:
“ISS is conscious of the chief order addressing proxy advisory companies and we at the moment are reviewing it rigorously. ISS is a SEC-registered funding adviser that for greater than 4 many years has offered unbiased analysis and vote suggestions knowledgeable by intensive shopper and stakeholder engagement. Our purchasers are refined institutional buyers, who decide how they want to vote by deciding on from a spread of voting insurance policies that information our work on their behalf, or by creating custom-made insurance policies for recommendation tailor-made to their very own specific wants. ISS doesn’t dictate or set company governance requirements and stays firmly dedicated to working professionally, ethically, independently, and in the very best pursuits of our purchasers, as we’ve got completed traditionally.
