Corporate Counsel Daily, U.S. Rep. Fitzgerald introduces bill to restrict proxy advisors, citing conflicts of interest, (Jun 25, 2025)

By Suzanne Cosgrove

Congressman alleges proxy advisory firms have an “outsized influence” over corporate governance, impose ESG on U.S. companies.

U.S. House Representative Scott Fitzgerald (R-Wis.) has introduced a bill called the “Stopping Proxy Advisor Racketeering Act,” which prohibits proxy advisory firms from issuing voting recommendations “when any conflict could reasonably be expected to affect the objectivity or reliability of proxy advice,” including being a member of a group that supports proposals similar to a shareholder-sponsored proposal.

According to the bill, which amends the Securities Exchange Act of 1934, any conflict of interest— direct or indirect—would result in a civil penalty against the proxy advisory firm as well as any other person that the Commission finds was a cause of the violation.

Proxy advisory firms are independent entities hired by corporations for research and other services to help inform and advise institutional shareholders, but they “operate in the shadows,” said Fitzgerald. “My bill will rein in these unaccountable firms and restore fairness and transparency for American investors,” he said.

GOP-led legislation. Republicans have recently called for greater SEC oversight of advisory firms, citing possible conflicts of interest. Fitzgerald said the two most prominent firms are a “foreign-owned duopoly.”

In April, the House Subcommittee on Capital Markets heard testimony from industry representatives and academics about the current role of proxy advisers, spotlighting Institutional Shareholder Services (ISS) and Glass Lewis, and what Subcommittee Chair Ann Wagner (R- Mo.) then called the “unchecked power of proxy advisory firms.”

Both companies have come under fire for their ESG-related shareholder resolutions.

Firm ownership. Institutional Shareholder Services is majority owned by Deutsche Börse Group, along with ISS management, and claims approximately 4,200 clients, including institutional investors who rely on ISS offerings and public companies focused on ESG and governance risk mitigation as a shareholder value enhancing measure.

Glass Lewis’ headquarters are in San Francisco, and it also has offices in New York, Washington, D.C., Kansas City, Ireland, Germany and Australia. Peloton Capital Management, a private equity firm, and Stephen Smith, a Canadian entrepreneur, acquired Glass Lewis from Ontario Teachers’ Pension Plan Board and Alberta Investment Management Corporation in March 2021.

Together, ISS and Glass Lewis command about 97 percent of the proxy advisory market.

LegislativeActivity: CorporateGovernance ESGNews GCNNews InvestmentAdvisers Proxies WisconsinNews