Yesterday, the WSJ reported that the proxy advisory firms Institutional Shareholder Services and Glass Lewis are being investigated by the FTC for potential violations of antitrust laws. The article notes:

The probe, which is in its early stages, is focused on the firms’ competitive practices and how they steer clients on hot-button issues such as climate- and social-related shareholder proposals, people familiar with the matter said. The FTC told Glass Lewis it was investigating whether it and others may have engaged in “unfair methods of competition,” according to a letter sent in late September that was reviewed by The Wall Street Journal.

The FTC probe follows an antitrust review launched by the Republican-led House Judiciary Committee this spring.

“This non-public investigation does not mean the Commission is suggesting Glass Lewis has acted unlawfully. With complete confidence in our longstanding commitment to high ethical standards, Glass Lewis is fully cooperating with the FTC’s document request,” a Glass Lewis spokeswoman said in a statement.

An ISS spokesman declined to comment.

Earlier this week, the WSJ reported that the White House is considering an executive order that would seek to restrict certain activities of ISS, Glass Lewis and the largest institutional investors. That article notes:

Trump administration officials are discussing at least one executive order that would restrict proxy-advisory firms such as Institutional Shareholder Services and Glass Lewis, people familiar with the matter said. That could include a broad ban on shareholder recommendations or an order blocking recommendations on companies that have engaged proxy advisers for consulting work, the people said.

Officials also are exploring limits on how index-fund managers are allowed to vote, seeking to curtail the power of such behemoths as BlackRock, Vanguard Group and State Street, the people said. These three together own on behalf of clients roughly 30% or more of many of the biggest U.S. publicly traded companies. One measure being discussed would require these index-fund managers to mirror their votes in line with clients who choose to vote.

We will be monitoring to see where all of this goes, because these measures could radically change the landscape for public companies.

– Dave Lynn