By Jody Godoy
Aug 5 (Reuters) – The U.S. Department of Justice on Wednesday rescinded decades-old guidance to a shareholder proxy advisory business, citing significant antitrust concerns over consolidation in the industry.
U.S. President Donald Trump has called for an antitrust probe of proxy advisers Institutional Shareholder Services and Glass, Lewis & Co, which help mutual fund companies and other big institutional investors decide how to vote at corporate elections. The two companies dominate the market for proxy advisory services.
The DOJ announced it withdrew a 1987 letter telling ISS that its business model of advising investors on corporate governance and shareholder votes did not raise antitrust concerns at the time.
A spokesperson for ISS did not immediately respond to a request for comment.
ISS, which was founded in 1985, had sought an opinion from the DOJ on whether its business model followed antitrust law. ISS said it would advise pension funds and other investors on corporate governance, the DOJ said.
ISS had said it would not “provide advice or engage in discussions with respect to the corporate operations or business activities, such as the purchase, production or sale of goods or services, of any company,” the DOJ said.
That statement is no longer true, the DOJ said as ISS now advises companies, not just their shareholders, on executive pay and corporate governance.
The advisers have long been under fire from conservative groups and Republican political leaders over their power to guide large swaths of the market, and their expressions of support for environmental, social and governance proposals.
(Reporting by Jody Godoy in New York; Editing by Daniel Wallis and Cynthia Osterman)
