The U.S. House Financial Services Committee’s Capital Markets Subcommittee held a hearing to examine the role and market influence of proxy advisory firms, with a focus on Institutional Shareholder Services (ISS) and Glass Lewis, and to assess whether the proxy process is delivering transparent and accountable shareholder voting outcomes. In opening remarks, Subcommittee Chair Ann Wagner framed the discussion around concentration, conflicts of interest, and the extent to which proxy advisor recommendations shape corporate governance and investor outcomes. Wagner stated that ISS and Glass Lewis control 97 percent of the proxy advisory market and argued that their influence extends beyond research into effectively steering vote outcomes, citing that clients are over 30 percent more likely than non-clients to follow recommendations to vote against a director. She highlighted practices such as prepopulated voting recommendations, described as contributing to “robo-voting,” and pointed to potential conflicts where firms sell consulting services to companies they also evaluate, including ISS’s role in rating and advising on its own environmental, social, and governance metrics. The remarks also referenced Glass Lewis’s recommendation against an ExxonMobil director after ExxonMobil sought judicial relief from an activist campaign that included Glass Lewis as a member, and raised concerns about an increase in ideologically driven shareholder proposals with costs described as reaching hundreds of millions of dollars annually. Wagner called on the Securities and Exchange Commission to “reassert its role” in ensuring the proxy system is fair, transparent, and accountable, and referenced a letter sent the prior month to then-Acting Chair Mark Uyeda that commended the rescission of Staff Legal Bulletin No. 14L while urging further steps, including restoring the original intent of Rule 14a-8, eliminating the significant policy exception, and enhancing oversight of proxy advisory firms.

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