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Proxy advisory services push back against bias claims (2023)
| Environmental, social, and corporate governance |
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As Republicans on Capitol Hill and throughout the states have pushed back against Institutional Shareholder Services (ISS) and Glass Lewis—the two biggest proxy advisory service providers—the two companies have responded, arguing that they provide unbiased services that allow clients to vote their proxies however they see fit:
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ISS and Glass Lewis executives on Thursday challenged Republican concerns that the proxy advisory giants foist ESG policies on companies, telling lawmakers they give objective recommendations to shareholders voting at annual meetings. The proxy firms provide pension funds and other large investors information they can use, or ignore, when deciding how to vote on environmental, social and governance topics, Steven Friedman of Institutional Shareholder Services Inc. and Eric Shostal of Glass, Lewis & Co. told House lawmakers. Their remarks came amid recent criticism of the proxy firms’ influence by Republican state attorneys general, state treasurers and other ESG skeptics.[1] |
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But while the companies argue that their services are ideologically neutral, Scott Shepard—the director of the Free Enterprise Project and the National Center for Public Policy Research and an experienced proxy-ballot voter—is pushing back, writing that other metrics show, in his view, that ISS and Glass Lewis are biased:
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A lot of the responsibility for pushing corporations hard to the left in recent years lies with an until-recently little-known pair of proxy-advisory companies, Institutional Investor Services (ISS) and Glass Lewis. The profound partisan bias (as well as the profound conflicts) of these companies has been noted before in these pages, but has recently been highlighted by people rather more important than me, including the editors of the Wall Street Journal and the sensible members of the House Financial Services Committee’s subcommittee on Oversight and Investigations. Once an obscure niche, shareholder proxy votes have become a major issue in recent years exactly because they have been used by the left to force companies away from their fiduciary duties and into taking the hard-left position on a whole series of issues, including equity-based discrimination, political-schedule decarbonization and bizarre and partisan social positions, as with Target having given away many millions in shareholder assets of organizations that train teachers to keep parents in the dark about gender confusion and other related issues that those organizations and teachers have themselves helped to foster. ISS and Glass Lewis have played a vital role in this process. They are a duopoly, controlling 97 percent of the proxy advisory market. They are vastly conflicted in giving advice about how shareholders in American companies should vote, in that they are owned by European and Canadian firms, respectively, so that their owners have a vested interest in saddling American companies through private proxy action with the same sort of value-destroying regulations that the EU and the increasingly absurd and authoritarian Canadian government have instituted. … Gary Retelny, the President and CEO of ISS, claimed recently that “[o]ur proxy advice is apolitical [and] impartial.” … In support of his claim, Retelny notes that “ISS’ benchmark policy supported just 52 percent of all shareholder proposals characterized as ‘environmental’ or ‘social’ while supporting more than 96 percent of management resolutions.” This, though, isn’t exculpation from the claim of partisanship. It’s a demonstration of it. It reveals that ISS’ benchmark policy takes the left side of social and environmental proposals about 60 percent of the time. This is because about 10 percent of all shareholder proposals come from center/right organizations, and ISS has never, ever supported one of those. So his supposed demonstration of non-partisanship really demonstrates that the score is: --ISS support of leftwing social and environmental shareholder proposals: 60 percent. --ISS support of center/right social and environmental shareholder proposals: 0 percent. In fact, ISS refuses even to communicate with supporters of such proposals. A financial industry firm that works with ISS has been trying to get it to commit to a meeting with center/right shareholder-proposal proponents for many, many months, wholly without success. In further “evidence” of non-partisanship, Retelny asserts that ISS offers voting-recommendation options “that range from one largely aligned with board recommendations to another for faith-based investors.” The thing is, though, that, as BlackRock of all organizations has demonstrated, its impliedly center/right religious specialty option is pretty much liberation theology leftism, “generally support[ing]” the leftwing ESG proposals that ISS’ baseline supports. Once again, then, what Retelny’s evidence really shows is that both ISS’ baseline and specialty policies support great scads of leftwing ESG proposals, while it has no policies at all that support any center/right shareholder proposals.[1] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
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