President Donald Trump on Thursday ordered a review of two major proxy advisory firms — companies that advise shareholders on votes — that had previously drawn the ire of Tesla CEO Elon Musk and others in Corporate America.
The executive order singles out the two biggest players in the market: Institutional Shareholder Services (ISS) and Glass Lewis.
Proxy advisory firms like ISS and Glass Lewis provide recommendations on how major investors like pension funds should vote on corporate decisions and at shareholder meetings — sometimes to the consternation of other shareholders or even corporate executives.
Trump’s executive order directs the Securities and Exchange Commission to review ISS and Glass Lewis specifically scrutinizing their use of diversity, equity and inclusion (DEI) and environmental, social and governance policies (ESG).
“Even if no immediate rules change, boards, institutional investors and the firms themselves take notice,” Kerry Berchem, a partner at Akin and co-leader of the firm’s corporate governance and activism practice, told CNN. “This can influence behavior indirectly — firms may alter recommendations, increase transparency, or adjust methodologies to avoid conflict with regulators.”
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