DOJ to Rescind Antitrust Guidance on Proxy Advisory Firms ISS and Glass Lewis

The U.S. Department of Justice is set to rescind a 1987 letter that has long protected the shareholder proxy advisory industry from antitrust challenges, according to a department official. The move signals a significant policy shift and increases regulatory pressure on the two firms that dominate the sector, Institutional Shareholder Services (ISS) and Glass, Lewis & Co.

Heightened Antitrust Scrutiny

According to a DOJ official, the department is withdrawing a 1987 letter originally issued to ISS. That guidance had concluded that the firm's business model of advising investors on corporate governance and shareholder votes did not raise significant antitrust concerns at the time.

The official cited significant antitrust concerns over consolidation in the industry as the reason for the policy reversal. Proxy advisors play a crucial role in financial markets by providing recommendations to mutual funds and other large institutional investors on how to vote in corporate elections, influencing matters from executive pay to board composition.

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Industry and Political Context

The proxy advisory industry has long been criticized by some business groups and Republican political leaders for its concentrated power. The two main firms, ISS and Glass Lewis, effectively operate as a duopoly, guiding a substantial portion of shareholder votes across the market.

This influence has drawn fire, particularly for their support of environmental, social, and governance (ESG) proposals. The decision to withdraw the guidance follows a call from U.S. President Donald Trump for an antitrust investigation into the two firms. According to the original Reuters report, a spokesperson for ISS did not immediately respond to a request for comment on the DOJ's plan.