Proxy advisers are facing mounting political pressure in the US, even as demand for their services grows elsewhere. For Glass Lewis, one of the two dominant global proxy advisory firms alongside ISS, that divergence is reshaping both its strategy and its product offering.
Lawmakers across more than a dozen US states are advancing legislation that could restrict how proxy advisers operate, forcing them to provide detailed financial justifications when recommending votes against corporate management or include disclaimers when such analysis is absent.
“What we see is that the American and European markets are developing very differently,” Diederik Timmer, head of Europe at Glass Lewis, told Investment Officer. “In the US you see a rollback of investor rights and accountability. In Europe, Australia and Japan, by contrast, sustainability remains embedded in investment processes.”
The shift reflects a broader political backlash against ESG investing in the US, where proxy advisers have increasingly become targets. At the same time, regulatory momentum in other markets continues to support demand for governance and sustainability research.
Regulatory pressure
The emerging patchwork of US-state-level rules risks complicating the delivery of independent proxy advice. In Indiana, legislation set to take effect in July will require advisers opposing management to provide financial analysis or include prominent disclaimers, exposing recommendations to greater legal scrutiny.
Pressure is also building at the federal level. Recent guidance from the US Department of Labor suggests that proxy advisers serving retirement plans could be treated as fiduciaries under ERISA, the law governing workplace pensions. That designation would subject them to stricter disclosure requirements and could apply even to firms that provide research rather than explicit voting recommendations.
Supporters of stricter rules on proxy advisers, such as Blaine Luetkemeyer, chief executive of the American Consumer and Investor Institute, say the real accountability problem lies with the advisers themselves, not corporate America.
“Two foreign-owned companies control 97 percent of the proxy adviser market in the United States,” he said, referring to Glass Lewis and ISS. “That means they have tremendous power over who runs American companies and how they operate.”
Glass Lewis is Canadian-owned and headquartered in San Francisco, while ISS is US-founded, owned by Germany’s Deutsche Börse, and based in Rockville, Maryland.
Luetkemeyer argued that advisers should not shape corporate decisions without holding shares. “Boards should answer to investors, not to proxy advisers who don’t even own a stake in the company,” he said.
Glass Lewis, for its part, has warned that the proposals are “unworkable” and risk suppressing advice that diverges from management. Timmer declined to comment on specific cases, citing ongoing investigations.
International expansion
While pressure is mounting in one market, the firm is expanding in another. Glass Lewis this month launched Climate Intelligence, its first major move beyond proxy voting into investment research. The platform uses artificial intelligence to assess how companies are positioned for the transition to a lower-carbon economy, focusing on financial materiality rather than headline emissions targets. It evaluates both strategy and execution, examining whether companies not only set targets but also allocate capital and build the capabilities needed to deliver on them.
The rollout is focused on Europe, the UK, Canada and Australia, regions where demand for climate-related data continues to grow. In the US, interest has cooled alongside the political backlash against ESG. “This is actually the first time that I see that demand in the US has softened,” Timmer said.
Elsewhere, he said, clients are asking for more forward-looking analysis. That shift is also reshaping Glass Lewis’s core business. The firm is moving away from a single “house view” on voting toward fully client-specific policies.
Some observervers see that shift as both defensive and structural. Proxy advisers are “making the move under extreme regulatory pressure and political pressure,” said Ann Lipton, professor of corporate law at the University of Colorado. Customized research may be perceived as “less controversial,” she said, even if it remains unclear whether regulatory scrutiny will ease.
At the same time, she noted, institutional investors themselves are becoming less aligned.
As priorities diverge, particularly on sustainability and governance, a single standardized recommendation is becoming harder to maintain. Timmer acknowledges the change but frames it as an evolution of the firm’s role.
“Our role is to help clients implement their own policies,” says Timmer. “That’s central to who we are as a service provider.”