The ESG proxy advisor game starts to crack

For many years “proxy advisory” services have been provided by a duopoly comprising two companies, Glass Lewis and Institutional Shareholder Services, with a combined market share of 97 percent engendered by blatant political favoritism. “Proxy advice” means recommendations toinvestors, retirement funds and large asset managersholding major stakes in public companies on how to vote on shareholder motions and other such proposals.Because ofdeeply perverse recent rulemakingboth formal and informal, at the Securities and Exchange Commission, the proxy advisory process has been transformed into one in which large institutional shareholders in a given company are virtually required to accept the recommendations of the proxy advisors. In particular, an important SEC rule (Rule 14a-8) has been changedto require firms to consider resolutions of “wider societal interest.” The upshot of this system: Utterly without statutory authority, this proxy advisory duopoly has become ade factoregulator of...