Proxy voting giants investigated by Missouri AG for misleading clients about their DEI and ESG priorities

FIRST ON FOX: Missouri Attorney General Andrew Bailey launched parallel investigations this week into two of the nation's leading proxy advisory companies, alleging they have abdicated their fiduciary duties and violated state consumer protection laws by misleading consumers about their prioritization of ideology over investor returns.

Bailey argued in civil investigative demands sent to Glass Lewis and Institutional Shareholder Services (ISS) that they are violating state consumer protection law by assuring their customers that their proxy voting recommendations are based solely on data and research – and are entirely neutral. But, simultaneously, Bailey argues that publicly available documents from the firms show that their proxy voting recommendations are designed to advance DEI and environmental causes regardless of whether they undermine investor returns. 

Glass Lewis and ISS are two foreign-owned powerhouses that control roughly 97% of the U.S. proxy advisory market, according to an April report from the House Financial Services Committee. The firms specialize in providing voting recommendations to institutional investors – such as pension funds, retirement systems and mutual funds – on how to vote during corporate shareholder meetings. These votes frequently include decisions related to board member elections, executive compensation, company policies and other proposals.

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Missouri Attorney General Andrew Bailey is accusing two major proxy advisory firms of misleading consumers by hiding their prioritization of DEI and ESG policies, even at the cost of investor returns. (iStock; Getty Images)

"Missourians deserve answers as to why the unseen power brokers, controlling much of corporate America, are pushing a leftist worldview at the expense of millions of honest investors," Bailey said. "These are foreign-owned actors manipulating the U.S. economy, and we will not let them thrive any longer. We are going after the source. These proxy advisors have held corporate America hostage with their radical ideologies. We are putting them on notice: Missouri will not tolerate ideological coercion disguised as investment guidance." 

In an enforcement petition Bailey sent to the state circuit court in an effort to compel the companies' compliance with the new probes, the attorney general points to statements on both ISS and Glass Lewis's websites, respectively, that insist they provide "objective and impartial offerings" that are "based on research and data." At the same time, Bailey points to internal company documents, such as a document titled "2025 Benchmark Policy Guidelines" from Glass Lewis, which includes numerous sections on the importance of advancing DEI and ESG causes.

"This means that Glass Lewis’s statement that it provides ‘research and data’ that allows its customers to ‘make informed investment decisions’ is false," Bailey wrote in his enforcement petition against Glass Lewis.

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Missouri Attorney General Andrew Bailey addresses members of the press in the old post office building in Downtown St. Louis on Thursday, Feb. 2, 2024. (Vanessa Abbitt/St. Louis Post-Dispatch/Tribune News Service via Getty Images )

Similarly, at ISS, Bailey points to company statements claiming it provides customers with "objective and impartial offerings," while simultaneously producing internal company reports that include commitments to recommending votes in favor of proposals "calling for the reduction of [greenhouse gas] emissions."

In addition to allegedly misleading consumers about their company priorities, Bailey is accusing Glass Lewis and ISS of omitting or failing to disclose material information about how it weighs DEI and ESG standards when recommending votes.  

Bailey's investigation is requesting a range of internal documents and communications to help determine whether Glass Lewis or ISS violated state consumer protection laws through its allegedly misleading claims and lack of transparency. 

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Proxy advisory firms are key players in the American financial system, providing recommendations for institutional investors on how to cast their votes on critical shareholder resolutions and proposals. (AP Photo/Mark Lennihan, File)

"ISS and Glass Lewis have been harming consumers and misleading institutional investors by promoting a radical political agenda instead of focusing on maximizing returns. By taking legal action against both firms, Attorney General Bailey is doing the right thing and holding them accountable for selfishly prioritizing racist DEI quotas, climate activism, and other outdated ESG nonsense," Will Hild, Executive Director at conservative nonprofit Consumers' Research said in a statement to Fox News Digital. 

"Such deception is not just financially reckless but also illegal and must be met with consequences," Hild continued. "This necessary investigation will aid in exposing these activist proxy advisors for deliberately ditching fiduciary duty in the name of furthering the ESG scam."

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Neither Glass Lewis nor ISS responded to repeated requests from Fox News Digital for comment. 

Earlier this year, Glass Lewis was served with a similar civil investigative demand by Florida's Republican Attorney General. That move followed another similar request for information in 2023 by 21 state attorneys general, including Bailey at the time.