The U.S. Department of Justice plans to withdraw longstanding guidance issued in 1987 that addressed antitrust considerations for proxy advisory firms, a Justice Department official said. The guidance had previously informed Institutional Shareholder Services that providing corporate governance advice and recommendations on shareholder votes did not, under the conditions described, raise antitrust issues.
Officials said the decision to rescind the 1987 letter follows growing antitrust concerns tied to consolidation within the proxy advisory industry. The industry consolidation has prompted questions about whether the marketplace for proxy recommendations functions competitively.
Separately, President Donald Trump has requested an antitrust probe into two major proxy advisory firms - Institutional Shareholder Services and Glass, Lewis & Co. Those firms are used by mutual fund companies and other large institutional investors to help determine how to cast votes at corporate elections.
Conservative organizations and Republican leaders have criticized the two firms for what they describe as outsized influence over large portions of the market. Part of the criticism centers on the firms' support for environmental, social and governance proposals, which critics say has an outsized impact on voting outcomes among many institutional investors.
Context and scope
The 1987 letter in question had provided assurance to an industry participant that its advisory activities would not automatically be viewed as violating antitrust laws. The Department of Justice's stated intent to withdraw that letter removes that prior comfort and signals a renewed focus on potential antitrust implications in the sector. The decision stems from concerns about market concentration and the role of proxy advisors in shaping shareholder votes.
Who is affected
- Proxy advisory firms that produce voting recommendations.
- Mutual funds and large institutional investors that rely on those recommendations to inform voting at corporate elections.
- Corporate issuers and governance stakeholders whose shareholder votes can be influenced by advisory guidance.
The Department of Justice official's comments indicate a regulatory reassessment of prior positions on the competitive implications of proxy advisory business models. Beyond the formal request for an antitrust investigation by the president, the move to rescind the 1987 guidance highlights ongoing scrutiny of the sector's structure and influence.