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Let’s face it, it is not easy begin a proxy advisory firm these days. If I were running one of these firms, I think that I would have the feeling that everyone is out to get me. When I last discussed the topic of proxy advisory firms back in June during our annual CompensationStandards.com webcast “Proxy Season Post-Mortem: The Latest Compensation Disclosures 2026,” I described the contours of a complex multi-front battle that proxy advisory firms are fighting at the federal and state level.

Weirdly, it has become an annual tradition that I frame my remarks on this webcast around some pop culture reference, and this year I chose to celebrate the theatrical release of Toy Story 5 with some bizarre Toy Story references that I tied to my topics. I attempted to sum up the situation for proxy advisors with this Toy Story tie-in:

Sticking with my Toy Story theme, I’m going to talk a little bit about the proxy advisory firms and what they’re going through at the moment. If you’ve watched Toy Story 4,000 times like I did because my kids were young when it first came out, you will certainly remember Sid Phillips, who is the neighbor of Andy. Andy is the owner of the toys, Woody and Buzz.

Sid had a penchant for torturing toys, including Woody when he got a hold of him. One can envision a world where young Sids like that would grow up to be politicians and regulators and state attorneys general who would turn their attention to proxy advisory firms instead of mounting doll heads on Erector set legs and things like that. That’s what we’re seeing with the proxy advisory firms as they are facing a multi-front attack, both at the federal and state levels.

Yet another lawsuit has been filed in this ongoing battle, with ISS commencing litigation earlier this month against the Attorney General of Oklahoma to challenge that state’s “copycat” law targeting proxy advisory firms. The law was enacted in May and will go into effect in November, absent court action. An article from The Journal Record notes:

HB 4429, known as the Proxy Advisor Transparency Act, was model legislation peddled by Consumers Defense, the policy arm of Consumers’ Research, a conservative consumer protection nonprofit.

The bill is modeled on a Texas law passed last year. At least 13 states have followed Texas’ lead, but so far, only Oklahoma, Kansas and Indiana have successfully managed to pass the bill through their state legislatures.

“Over the past year, three federal courts have granted preliminary injunctions against similar laws in Kansas, Indiana and Texas,” Institutional Shareholder Services said in a statement, “and we strongly believe a similar result is warranted in Oklahoma.”

Institutional Shareholder Services, an international investment management firm with more than 40 years of history as an industry leader, called the requirements Oklahoma’s HB 4429 imposes “onerous.”

“As it has in other states, ISS is challenging the constitutionality of a new Oklahoma statute aimed at undermining its business by burdening its ability to speak freely on matters of corporate governance,” the statement read. “ISS refuses to back down from overreaching, unconstitutional attempts by state governments to violate free speech and distort the free flow of information to institutional investors.”

According to market data, Institutional Shareholder Services and Glass Lewis, another major proxy advisory firm, control roughly 90% of the proxy advisory industry.

In an Institutional Shareholder Services’ complaint filed with the U.S. District Court for the Western District of Oklahoma, the firm argued that many issues arise for shareholder votes that do not “lend themselves to financial prediction,” such as voting for or against reelecting a board member who has missed meetings.

“The law ignores that different clients ask ISS to give advice based on each client’s own (and often differing) views about the best way to advance shareholder value,” the complaint read. “Moreover, attempting to perform this ‘written financial analysis’ would force ISS to take positions on controversial issues that ISS would not otherwise.”

We have not yet seen the SEC enter the fray, but based on the directives from a December 2025 Executive Order, it most certainly will, and in all likelihood soon.

– Dave Lynn