Institutional Shareholder Services

Institutional Shareholder Services Inc. (ISS) is a proxy advisory firm. Hedge funds, mutual funds and similar organizations that own shares of multiple companies pay ISS to advise (and often vote their shares) regarding share holder votes. It is the largest such firm, with over 61 percent of the business.[2]

Institutional Shareholder Services Inc.
IndustryInvestment Management
Founded17 March 1999 (17 March 1999)
HeadquartersRockville, Maryland, United States
Key people
Gary Retelny (CEO)
ServicesProxy advisory
SRI advisory
Corporate governance
Market intelligence
SubsidiariesISS-Ethix
FWW Fund Services[1]
Websiteissgovernance.com

In response to ISS's recommendations to vote against fee-shifting provisions in the event of securities fraud litigation, corporate interests have criticized ISS and suggested that it needs to be regulated.[3] ISS is today the world’s leading provider of corporate governance and responsible investment solutions, market intelligence and fund services, and events and editorial content for institutional investors and corporations, globally.

History

With Disney announcing the combination of the CEO and chairman positions on October 6, 2011, past the date of shareholder proposal deadline, and increase CEO/chair pay, ISS called for a no vote against the four Nominating and Governance Committee board members at the 2012 annual meeting.[4] ISS recommended to clients two candidates nominated by billionaire investor Carl Icahn to the drugmaker Forest Laboratories’ board of directors in a 2012 proxy contest.[5]

In 2013 ISS agreed to pay the SEC a fine of $300,000 and retain an independent compliance consultant to settle charges that it failed to safeguard the confidential proxy voting information of clients.[6] ISS was highlighted in a 2014 opinion piece in the New York Times by Cornell University law professor Lynn Stout as having an outsized power in the selection of CEOs of major corporations in the United States with ramifications for the U.S. economy.[7] It was owned by MSCI until April 30, 2014 when it was purchased by Vestar Capital Partners.[8]

Ethix SRI Advisors was purchased by ISS in September 2015 to help ISS expand in Europe. Ethix was renamed with the acquisition to ISS-Ethix and would lead ISS's sustainable and responsible investment activities.[9] In 2017, ownership of ISS switched to Genstar Capital.[10] In March 2018, ISS also acquired the German ESG rating agency oekom research AG.[11] In November 2020 Deutsche Börse announced the acquisition of a majority in ISS-shares for about 1.5 billion Euro.[12]

Notes
  1. https://www.fww.de/
  2. James R. Copland (Fall 2012), A Report on Corporate Governance and Shareholder Activism, Proxymonitor.org
  3. "Shareholder Litigation Without Class Actions". Arizona Law Review. 57 (1): 213. 2015. Retrieved 18 November 2019.
  4. Chmielewski, Dawn C. (March 2, 2012). "Proxy advisor criticizes Disney CEO Iger's new chairman title". Los Angeles Times. Retrieved February 18, 2016.
  5. "Forest Labs shareholders elect 1 of 4 board nominees from investor Carl Icahn". August 15, 2012.
  6. "SEC Charges Institutional Shareholder Services in Breach of Clients' Confidential Proxy Voting Information". SEC. 2013-05-23.
  7. Lynn Stout (September 14, 2014), To Increase Investment, Change the Definition of 'Shareholder Value'
  8. "Vestar Capital Partners Completes Acquisition of Institutional Shareholder Services". ISS press release. April 30, 2014.
  9. Brown, Adam (September 15, 2015). "ISS acquires Scandinavia-based SRI adviser Ethix". IR Magazine. Cross Border Ltd. Retrieved February 18, 2016.
  10. "Genstar Capital, in Partnership with Management, Announces Acquisition of Institutional Shareholder Services from Vestar Capital Partners". ISS press release. September 7, 2017.
  11. "oekom research AG to Join Institutional Shareholder Services". ISS press release. March 15, 2018.
  12. "Deutsche Börse kauft Stimmrechtsberater ISS für 1,5 Milliarden Euro". Handelsblatt. November 17, 2020.
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