The Justice Department’s Antitrust Division on Aug. 5 withdrew a 1987 business review letter that had given Institutional Shareholder Services favorable antitrust treatment for nearly four decades, signaling potential new scrutiny of the proxy advisory industry.
ISS and its primary competitor Glass Lewis together control more than 90% of the proxy advisory market, which advises institutional investors on how to vote at corporate shareholder meetings across thousands of U.S. public companies each year.
Business review letters represent the DOJ’s historical assessment that a particular business practice does not warrant enforcement action. Withdrawing one does not constitute a formal enforcement action but signals the Antitrust Division may examine the company’s market position more aggressively.
The withdrawal removes a legal comfort letter that ISS has relied on since the Reagan administration. The 1987 letter assessed that ISS’s operations at the time did not raise antitrust concerns, but the Antitrust Division determined that assessment no longer reflects current market conditions, according to the department.
Proxy advisory firms have faced growing scrutiny from Congress and corporate governance advocates who argue their concentrated market power gives them outsized influence over corporate decision-making, including votes on executive compensation, board composition, and environmental and social governance policies.
The action follows broader administration concerns about the influence of proxy advisory firms on ESG-related shareholder voting. Critics have argued that ISS and Glass Lewis have used their market dominance to advance policy positions that do not reflect the preferences of the individual investors whose retirement funds are being voted.
ISS advises institutional clients managing trillions of dollars in assets.