The Department of Justice Antitrust Division withdrew a Business Review Letter issued to Institutional Shareholder Services in 1987, removing a longstanding legal protection for the proxy advisory firm that controls a dominant share of the market influencing corporate shareholder votes. The withdrawal was announced Aug. 11.
ISS and its primary competitor, Glass Lewis, together control more than 90% of the proxy advisory market. Their recommendations influence shareholder voting at thousands of publicly traded companies annually, affecting decisions on executive compensation, board composition and corporate strategy.
Business Review Letters signal the DOJ’s intention not to challenge a proposed business arrangement. Withdrawing one does not initiate prosecution but removes a significant layer of legal comfort that ISS has operated under for nearly four decades.
The withdrawal signals that DOJ may be reconsidering whether ISS’s dominant market position warrants antitrust scrutiny. The move follows years of criticism from members of Congress, the Securities and Exchange Commission and corporate leaders who argue that proxy advisory firms wield outsized influence over American corporations with limited accountability.
Critics contend that ISS and Glass Lewis operate as a near-duopoly, issuing boilerplate voting recommendations that institutional investors follow reflexively rather than conducting independent analysis. Supporters counter that the firms provide a valuable service by helping investors evaluate thousands of proxy votes each year.
The DOJ did not announce any specific enforcement action or investigation alongside the withdrawal. However, removing the Business Review Letter creates legal uncertainty for ISS that could affect its business operations, client relationships and market behavior.
The action is the latest in a series of steps across the administration to increase scrutiny of intermediaries that exercise significant influence over financial markets.