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The Federal Trade Commission is probing proxy advisory firms Institutional Shareholder Services and Glass Lewis for possible antitrust violations over how they influence shareholder votes, said people briefed on the matter.
The move comes as US President Donald Trump was considering an executive order to curb the power of the two proxy advisers as well as that of asset managers with big passive investing businesses such as BlackRock and Vanguard, which control vast stakes across corporate America, these people said.
Trump had been urged to examine the topic by several influential chief executives frustrated with what they view as the excessive power held by proxy advisers to influence crucial corporate decisions, they added.
Previous administrations have also debated corporate governance reforms, but Trump’s team was viewing the issue through a more populist lens that blends antitrust concerns with cultural politics, said two people.
ISS and Glass Lewis are the two most prominent players in making recommendations to institutional investors on votes from everything to executive pay to board composition. The FTC is likely to examine whether their market dominance is unfairly restricting competition as well as hurting consumers more broadly.
Glass Lewis said in a statement that “the existence of this non-public investigation does not suggest that the commission believes Glass Lewis, or any other named party, has violated the law”. It added it was complying with the FTC’s document request. The FTC and ISS declined to comment.
The Wall Street Journal first reported the FTC investigation.
Some of Trump’s allies on Wall Street have long lamented the dominance of the proxy advisers and the large index-fund managers over shareholder votes, claiming it could lead to a market concentration that stifles competition and shareholder diversity.
BlackRock’s chief executive Larry Fink has been singled out by some on the American right for the asset manager’s championing of strategies based on environmental, social and governance priorities.
Many within Trump’s orbit still see Fink’s past letters to CEOs as an over-reach and an attempt to impose progressive social agendas through financial clout. The new push, said people briefed on the matter, was as much about rebalancing power in corporate governance as it is about reversing what they view as ideological capture in the boardroom.