Republican lawmakers are zeroing in on two powerful foreign-owned firms they say are quietly shaping how Wall Street votes, and pushing corporate America toward progressive environmental, social, and governance (ESG) goals in the process.
Their focus is on Institutional Shareholder Services (ISS) and Glass Lewis, two foreign-based proxy advisory companies that operate with outsized sway over shareholder decisions. ISS is owned by Germany’s Deutsche Börse, and Glass Lewis is owned by a Canadian private equity firm.
Both firms are tasked with advising how large institutional investors, like BlackRock, Vanguard, and State Street, cast votes at shareholder meetings, including on executive pay, board appointments, and company policies related to ESG and DEI (diversity, equity, and inclusion).
The firms were originally created to help investors manage tens of thousands of votes, offering a kind of “cheat sheet” for quick decision-making. But critics say ISS and Glass Lewis now often set the direction of corporate decision-making.
“There must be greater transparency, due process, and oversight to ensure that proxy voting remains accountable to shareholders — not outsourced to unregulated intermediaries,” said Rep. French Hill (R‑AR), chair of the House Financial Services Committee, to the Washington Examiner.
Many investors follow these firms’ advice closely, some even automatically, giving them enormous sway over boardroom decisions, especially when it comes to ESG issues.
That has real-world implications for millions of Americans. Most people with a 401(k), pension, or retirement plan are invested by asset managers that rely heavily on proxy advisor guidance from groups like ISS or Glass Lewis. If votes prioritize ideology over returns, that could erode retirement savings.
“These decisions aren’t just symbolic… they can shrink margins, hurt stock prices, and reduce the value of a teacher’s pension or construction worker’s 401(k),” said one GOP aide.
Sen. Tim Scott (R‑SC), who chairs the Senate Banking Committee, is spearheading oversight efforts in the Senate. In a letter to both firms in late May, Scott and nine Republican colleagues raised concerns that ISS and Glass Lewis are steering corporate votes based on ideology, not economics.
“Two foreign-owned companies hold a near-duopoly over proxy advisor services in the United States — influencing boardroom decisions, shareholder votes, and corporate strategy across the American economy, as well as a wide range of public policy on important issues,” Scott said in a statement to the Washington Examiner. “They also routinely issue recommendations based on Left-wing politics over sound economic analysis.”
The real-world influence of these firms is well documented. A 2018 study of 713 major investors found that when ISS recommended voting for an executive pay package, 95 percent of them did. But when ISS opposed it, support dropped to just 68 percent. Similar shifts were seen in votes on stock plans, board seats, and efforts to replace company leadership. Glass Lewis also had a strong impact, when it backed a proposal during a leadership fight, support for that measure jumped by 64 percent.
One of the most striking examples of proxy advisor influence came in 2021 during a boardroom shake-up at ExxonMobil. A tiny activist firm called Engine No. 1, which owned just 0.02% of Exxon’s shares, launched a campaign to push the oil giant toward more aggressive climate action by replacing three board members.
But, they didn’t do it alone. Both ISS and Glass Lewis backed Engine No. 1’s candidates, and some of the country’s biggest investors, including BlackRock, Vanguard, and large pension funds, followed their lead. The result: three new directors and a major shift in Exxon’s climate strategy.
A House Judiciary report later detailed how the proxy firms had aligned their recommendations with a climate activist network called Climate Action 100+, raising concerns that they were promoting a political agenda rather than offering neutral guidance.
Supporters of ESG and the proxy process argue that these firms play an important role in helping investors manage thousands of shareholder votes each year, offering independent research and recommendations. They also push back on claims of political bias, arguing that ESG investing, focused on long-term risks like climate change, board accountability, and data security, can be aligned with strong financial performance. ISS and Glass Lewis have said their guidance is based on established policies, not ideology, and that investors are free to vote however they choose. Both companies did not respond to requests for comment.
So far, federal regulators have taken a mixed approach. The Securities and Exchange Commission (SEC) introduced new rules in 2020 to boost transparency and allow companies to respond to proxy firm recommendations. But under Chairman Gary Gensler, the SEC rolled back those reforms in 2022. And a recent court ruling further restricted the agency’s oversight, finding that proxy advice doesn’t qualify as “solicitation” under federal law, limiting the SEC’s authority to regulate it. The SEC did not immediately respond to a request for comment.
Rep. Riley Moore (R‑WV), a member of the House Financial Services Committee, said lawmakers must remain aggressive in countering what he calls a “woke” investment agenda being quietly driven by foreign proxy firms.
“We need to stay vigilant against ESG, especially as proxy advisors turn more and more decisions over to foreign-owned management,” Moore told the Washington Examiner. He pointed to recent efforts by West Virginia and other states to pull public funds from ESG-focused investment strategies, but warned that “BlackRock and other private equity firms are dead set on keeping ESG, DEI, and other woke investing practices alive.” He called for stronger oversight from both Congress and federal regulators.
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Legal and regulatory challenges are now mounting. Just last week, a federal judge in Texas allowed a major antitrust lawsuit to move forward against BlackRock, Vanguard, and State Street. The case alleges the firms coordinated to suppress coal production by aligning their votes through climate-focused investor alliances, a potential violation of federal competition law.
Separately, Missouri Attorney General Andrew Bailey is investigating ISS and Glass Lewis for allegedly misleading clients and concealing political motives behind their recommendations.
In Congress, the House last year passed the Protecting Americans’ Retirement Savings from Politics Act, which would require proxy advice and shareholder proposals to focus on financial outcomes, not ideological agendas. But the bill was never brought up in the Senate. Hill’s committee has held multiple hearings on the issue and released a report titled “The Failure of ESG,” calling for major reforms to how proxy firms operate, and aides say more oversight efforts are likely in the months ahead.
“Our Committee looks forward to working with Chairman Paul Atkins and the Securities and Exchange Commission on proper oversight,” Hill added.