Elon Musk Triumphs Against Longtime Adversary with Trump’s Support
In a significant move, President Donald Trump has initiated a review of two prominent proxy advisory firms: Institutional Shareholder Services (ISS) and Glass Lewis. This executive order, issued on a Thursday, reflects concerns voiced by many in Corporate America, including Tesla CEO Elon Musk.
Trump’s Directive on Proxy Advisory Firms
The executive order specifically targets ISS and Glass Lewis, the largest firms in the sector. These companies play a crucial role by advising major institutional investors, such as pension funds, on how to vote on corporate matters. Often, their recommendations can create discord among shareholders and executives.
Focus of the Review
This order directs the Securities and Exchange Commission (SEC) to scrutinize the advisory firms’ use of diversity, equity, and inclusion (DEI) policies, as well as environmental, social, and governance (ESG) criteria.
- ISS has been operational since 1985.
- Glass Lewis began its journey in 2003.
- These firms are crucial in guiding votes on corporate governance issues.
Experts, like Kerry Berchem of Akin, suggest that even without immediate changes, the review could influence how these firms operate. This increased scrutiny may lead to enhanced transparency and adjustments in their methodologies.
Elon Musk’s Perspective
This executive order marks a victory for Musk, who has previously criticized the role of ISS and Glass Lewis in influencing shareholder decisions. Notably, these advisory firms have opposed proposals such as Musk’s requests for increased compensation in the past.
Industry Reactions
Concerns surrounding proxy advisory firms’ influence have been echoed by others in the financial sector. JPMorgan Chase CEO Jamie Dimon has criticized them as “incompetent,” arguing that their power should not dictate corporate governance.
An analysis suggests that Trump’s focus on these advisory firms stems from a belief that they promote politically motivated agendas contrary to shareholder interests. The administration’s move reflects a broader trend of Corporate America distancing itself from DEI and ESG policies that were once popular.
Proxy Advisory Firms Under Pressure
The investigation doesn’t end with the executive order. Florida’s Attorney General, James Uthmeier, has sued ISS and Glass Lewis for alleged violations of antitrust laws. Furthermore, the order mandates that the Federal Trade Commission (FTC) also assess whether these firms breach antitrust regulations.
Lawrence Elbaum, an expert in shareholder activism, commented that this move highlights the growing concerns about the excessive influence these firms wield in corporate America. Until the reviews are complete, the future implications for ISS and Glass Lewis remain uncertain.
Conclusion
Ultimately, Trump’s directive is seen as a significant shift in the balance of power within corporate governance, potentially favoring corporate boards over proxy advisory firms. The long-term consequences of this action will unfold as the SEC and FTC conduct their reviews.
