House Financial Services hearing spotlights proxy-adviser influence over shareholder votes

WASHINGTON — Lawmakers and witnesses at a House Financial Services Committee hearing on Proxy Power and Proposal Abuse on Oct. 25 examined the influence of proxy-advisory firms and large index fund families on corporate voting, with members and witnesses saying that a small number of intermediaries can determine outcomes that affect retirement funds and public companies.

“Two firms control virtually the entire proxy-advice market,” James R. Copeland, senior fellow and director of legal policy at the Manhattan Institute, told the committee. “These two firms and the big three passive index fund families hold extraordinary sway over the governance of all publicly traded corporations in the United States.”

Why it matters: Committee members said recommendations from proxy advisers such as Institutional Shareholder Services (ISS) and Glass Lewis, together with so‑called “robo‑voting’’ by institutional managers, can amplify a tiny proponent’s proposal into wide shareholder consideration. Critics say that influence can steer corporate policies on social and environmental topics unrelated to a company’s core business, raising costs for companies and adding regulatory uncertainty that may discourage IPOs and…