Regulators Must Ensure That Proxy Advisory Firms Have the Best Interests of Investors in Mind

Scott Fitzpatrick | July 7, 2025

(The Washington Times) — Over the past decade, a war has been waged in corporate boardrooms across America. It’s a battle that has taken place with little to no public awareness — and it’s caused the democratic process to be circumnavigated as policymakers have embraced partisan ideology over the financial security and economic well-being of retail investors.

Americans are tired of woke policies and are eager to see our country get back to the business of doing business. President Trump agrees. He has issued executive orders banning illegal discrimination practices, which led to household-name brands taking steps to abandon diversity, equity and inclusion (DEI) practices en masse. The country’s largest asset managers and banks have ditched climate groups such as the Net-Zero Banking Alliance, which was itself a misguided climate initiative that investors were pressured into signing up for under four years of President Joe Biden’s bureaucracy.

But there’s another front in this culture war that many Americans don’t know about: proxy voting. Proxy voting is the practice of large financial institutions outsourcing corporate voting to a “proxy” that is fully empowered to vote on behalf of institutions such as government-sponsored pension boards.

The proxy industry is dominated by two players: Glass Lewis and Institutional Shareholder Services (ISS). Together, these two firms control as much as 97% of the proxy advisory market. They wield immense influence over corporate decision making, yet they are not held to the same standards as firms in other parts of the finance industry when it comes to transparency or protections for investors.

In fact, these firms have no mandate to disclose conflicts of interest or even conduct due diligence. The end result: They effectively have free rein to push companies to take environmental, social and corporate governance (ESG)-motivated positions, even if those positions are not in the best interest of investors.

A 2022 report found that ISS recommended voting in favor of ESG resolutions 75% of the time, while Glass Lewis made such recommendations in over 40% of votes. In their 2024 report, these firms maintained similar support, but Wall Street’s “Big Three” asset managers — BlackRock, State Street and Vanguard — significantly decreased their support. BlackRock supported 4% for both environmental and social resolutions; State Street supported 13% and 7%, respectively. Vanguard didn’t support any environmental resolutions and only 1% of social ones.

I have first-hand experience with this duopoly as I saw its impact during the time I served as Missouri state treasurer. As someone who was elected to office with a mandate to maximize the return on the taxpayer dollars invested by our state, I found it a nearly impossible task to find a proxy voting plan that prioritized the financial interests of investors over the advancement of far-left political principles.

Because the market is dominated by the duopoly of Glass Lewis and ISS, we were left with essentially selecting the least bad option. That’s not good for Missourians, and it’s not good for Americans.

I’m a business guy, and if there’s one thing I know, it’s that having a choice is always better for the consumer. In a transparent and competitive market, consumers can and will take their business elsewhere if a company doesn’t offer a quality product. We need these same principles to apply for the average American, who is investing for their future retirement or their kids’ college education. Americans deserve to know that when they invest their hard-earned money with a company or asset manager, that entity will work to maximize their returns, not advance whatever radical social or political cause they prefer at the moment.

There are three ways we can work to fix this problem. First, investors themselves, including board members of pension plans, need to engage on this issue, take control of their proxy voting back from the duopoly and ensure their corporate votes are used to further the financial goals of their members, rather than the political flavor of the month.

Second, regulators need to take a close look at proxy advisers to ensure that they have the best interest of investors in mind. Finally, investors need the private sector to do what it does best and create choices for the customer. There is no doubt the financial sector is capable of providing more options in this area, and I can testify first-hand that the demand for these options is strong.

We have made great progress in the fight to end the influence of the woke agenda on investment policy, but we still have more battles to wage if we’re going to ensure the economic well-being of investors is the undisputed top priority, as it should be. We can’t let up the fight. The American consumer is counting on us.

Scott Fitzpatrick has been serving as the state auditor of Missouri since 2023. A Republican, he previously served as Missouri state treasurer from 2019 to 2023 and represented Missouri’s 158th District in the Missouri House of Representatives from 2013 to 2019.