Congress questions foreign ownership and influence of proxy advisory firms ISS and Glass Lewis

The U.S. House Committee on Financial Services convened on April 29, 2025, to address concerns surrounding the influence of proxy advisory firms, specifically Institutional Shareholder Services (ISS) and Glass Lewis, on American capital markets. The meeting highlighted the significant market share held by these two firms and the potential conflicts of interest arising from their foreign ownership.

The session began with discussions on the implications of conflicts of interest in the political and corporate spheres. Witnesses emphasized the need for transparency, particularly regarding the advisory roles of ISS and Glass Lewis, which are both foreign-owned—ISS by Deutsche Börse and Glass Lewis by a Canadian private equity firm. This ownership structure raises concerns about the influence these firms exert over U.S. retirement accounts and corporate governance.

Key points of discussion included the lack of regulatory requirements for these firms to disclose conflicts of interest. Witnesses unanimously agreed that such disclosures are essential for protecting investors. The committee members expressed frustration over the Securities and Exchange Commission's (SEC) previous attempts to regulate proxy advisors, which were ultimately suspended and rescinded.

The conversation also touched on the broader implications of proxy advisory influence on the business climate, particularly for manufacturers. Witnesses noted that the power held by these firms could deter companies from going public, thereby limiting access to capital for American businesses.

As the meeting progressed, members raised concerns about the potential for proxy advisors to recommend votes on illegal resolutions without accountability. The lack of legal oversight for these firms was a recurring theme, with calls for legislative action to ensure they are held liable for their recommendations.

In conclusion, the committee's discussions underscored a bipartisan recognition of the need for reform in the proxy advisory space. The meeting concluded with a commitment to pursue legislation aimed at enhancing transparency and accountability for proxy advisory firms, ensuring that American investors are better protected in the evolving landscape of corporate governance.