The average American who owns stock in a public company through a 401(k) or a brokerage account has likely never heard of Institutional Shareholder Services. The firm is perhaps the most influential proxy advisor, advising pension funds and other institutional investors how to vote on shareholder proposals. Nonetheless, the secretive firm holds a vast amount of influence over how public companies operate.
ISS has great potential for conflict of interests because it provides shareholder voting recommendations on publicly traded companies and consulting services to those companies.
In the case of ISS, this means the subtle threat of adverse shareholder votes if companies don’t pay fees to ISS to become clients. Even Glass Lewis, which is owned by two activist pension funds, opposes the ISS model, calling the provision of consulting services “a problematic conflict of interest that goes against the very governance principles that proxy advisors like ourselves advocate.”
Read the full piece at The Weekly Standard: