Attorney General Ken Paxton has opened an investigation into companies Glass Lewis & Co. and Institutional Shareholder Services, Inc. (ISS), claiming they might be using their proxy advisory roles to push a "radical" agenda on unsuspecting companies and investors, according to an announcement on the official Texas Attorney General website. The crux of Paxton's concern hinges on allegations that these firms are influencing corporate decisions with voting recommendations that support diversity, equity, and inclusion (DEI) initiatives and assertive environmental policies, rather than sticking strictly to maximizing financial returns.
Dominating the international market for proxy advisory services, Glass Lewis and ISS are pivotal in shaping the investment and governance strategies of major corporations, their combined market share is more than 95%, which means that their recommendations hold substantial weight, potentially impacting billions within the financial system, however, Paxton believes that these two firms have not sufficiently grounded their guidelines with rigorous economic analysis. The Texas Attorney General's office cited language from these firms promoting DEI and aggressive climate policies, describing their communications as "a word salad of corporate lingo" that doesn’t prioritize the financial interests of companies and investors.
Labeling the behavior of Glass Lewis and ISS as a covert operation to smuggle radical, liberal ideology into corporate America, Paxton is wielding Civil Investigative Demands to unravel whether these powerful advisory firms have violated consumer protection laws in Texas. These laws include mandates against nondisclosure of material facts that could significantly influence investment decisions. "Proxy firms like Glass Lewis and ISS too often sacrifice sound financial guidance to advance left-wing political goals, cheating not only investors but the American people as a whole," Paxton stated, Texas Attorney General.
