Two proxy advisers exert outsized influence over how institutional investors vote.
Elon Musk called ISS and Glass Lewis “corporate terrorists.” Jamie Dimon said they should be “gone and dead.” You might dismiss this as two powerful men annoyed that someone, somewhere, has opinions about them. Fair point. Except the Business Roundtable agrees. The Chamber of Commerce agrees. So does a Republican and a Democrat from Missouri who used to run the same House financial subcommittee.
When Jamie Dimon and Elon Musk agree on anything, pay attention. When they're both saying the same thing as a Missouri Democrat, call your broker.
ISS and Glass Lewis advise institutional investors on how to vote their shares. Pension funds, index funds, the people managing your retirement account. Proxy voting is tedious, technical, and relentless. Most institutions don't have the staff for it, so they outsource. Two firms handle more than 90 percent of that market. The FTC is now investigating whether that concentration constitutes anti-competitive behavior. It is not hard to see why.
Except "here's our recommendation" became "here's what you'll do" — and nobody noticed until it was already true. Deviating requires documentation. Documentation creates liability. Compliance departments exist to avoid liability. So they follow the advice, every year, across trillions of dollars, without much asking why.
Nobody handed these firms their influence. It was abdicated.
These two firms are foreign-owned: ISS by Deutsche Börse, a German exchange operator; Glass Lewis by a Toronto-based private equity firm. Yet they exercise remarkable influence over how American companies allocate capital, manage their workforces, and respond to shareholder pressure. That influence has had real costs.
For years, ISS and Glass Lewis pushed institutional investors toward ESG-aligned voting recommendations that steered capital away from energy, agriculture, and manufacturing, sectors that employ millions of Americans and underpin the broader economy. Companies that resisted faced coordinated shareholder pressure. Those that complied often did so at the expense of profitability and competitiveness.
The results showed up in higher energy prices, constrained domestic production, and retirement portfolios that underperformed because ideology displaced returns. A retiree didn't vote for any of this. Neither did Congress.
The SEC made it worse. Rules finalized in 2020 added oversight requirements on proxy advisers. The firms hated them. The Biden administration rolled most of it back anyway, leaving the regulatory framework in a state of studied ambiguity. The problem isn't that proxy advisers exist. It's that nobody can agree on what rules govern them. That's the actual scandal. Not the firms. The vacuum around them.
President Trump’s executive order is the right diagnosis, if not the cure. It names the problem and forces a conversation Washington has avoided for years. The executive order also directs the Department of Justice to examine whether proxy advisers engage in anti-competitive behavior or deceptive practices that harm American consumers — a signal that the administration views this as more than a regulatory nuance.
Executive orders don't necessarily survive administrations. Legislation does. The order points the direction; Congress needs to make the trip.
Former Representatives Blaine Luetkemeyer and William Lacy Clay made this point in an op-ed — a Republican and a Democrat, same subcommittee, same conclusion. That means legislation — unglamorous, slow, written in language nobody reads until a court cites it fifteen years later.
SEC Chair Paul Atkins has proxy adviser rulemaking on his agenda for the first half of this year. That's not a reason to wait. It's a reason to move.
There is no shortcut. Anyone promising one is selling something. That includes some of the loudest voices currently calling for reform.
Not everyone upset about ISS and Glass Lewis is upset for your sake.
Corporate executives have long chafed at recommendations that empower shareholders to challenge pay packages, board composition, and climate commitments. The Chamber of Commerce and the National Association of Manufacturers do not historically organize around the interests of retail investors.
Their preferred outcome and the correct outcome partially overlap. That's not the same thing as alignment.
Watch the fine print. It's where the mischief lives.
Here's what the fine print actually says. ISS and Glass Lewis sell consulting services to the same companies they're rating. Pay ISS to help design your executive compensation package, and ISS will advise your shareholders how to vote on it. The firms insist their advisory and consulting arms don't talk to each other. Maybe. But an incentive that obvious, unaddressed for two decades, explains more about Washington than it does about Wall Street.
The foreign ownership question isn't just a footnote. The firms' ultimate principals, a German exchange operator and a Toronto-based private equity firm, have no particular obligation to American shareholders, American workers, or American capital markets. Yet their recommendations shape governance decisions across trillions of dollars in U.S. assets. The only mystery is why it took Washington this long to notice.
The fix isn't complicated. Mandatory conflict-of-interest disclosure. Accuracy standards with real enforcement. Clearer rules on what qualifies as a legitimate shareholder proposal. Not a gift to management. Just a system where the advice isn't shaped by incentives investors aren't allowed to see.
The proxy advisory industry is a problem created almost entirely by institutional laziness and regulatory drift. It is not a cabal. It is not a cartel. It is what happens when a hard problem gets handed off to the cheapest available solution and never revisited. The solution calcified. And now, twenty years on, two firms that nobody elected and nobody can easily fire have a quiet veto over a substantial portion of American corporate governance.
Nobody planned this. That's not a defense. That's an indictment.
The question is whether the people currently making the most noise about it are actually interested in the fix — or just interested in replacing one unaccountable influence with another. The difference matters enormously to the retiree in Ohio who has never heard of ISS, has no idea his pension fund follows their recommendations, and would be furious if he did.
He should be. And Congress should act like it.
Phil Anderson is the President of America’s Economy First and former Executive Director of the Financial Services Coordinating Council
James Carter is a Policy Advisor at America's Economy First. He served as Deputy Undersecretary of Labor (2006-07) and as Director of the America First Policy Institute's Center for American Prosperity (2021-23).
