Op-Ed: The Proxy Advisers’ Forty-Year Free Pass Just Ran Out

On August 5, the Justice Department’s Antitrust Division withdrew a business review letter it issued to Institutional Shareholder Services back in 1987. Four months earlier, the Labor Department told the same industry it had been acting as an ERISA fiduciary all along, welcome or not. Two federal agencies, working from two different statutes, landed on the same conclusion: proxy advisers have spent decades shaping how billions of dollars in retirement assets get voted, while avoiding the accountability that decision-making is supposed to carry. That run just ended.

I’ve spent 30 years managing capital across private equity, private credit, hedge funds, and family offices. In my world, nobody advises a client on how to vote or deploy capital for a fee without owing that client a duty of loyalty. Tell a limited partner his general partner isn’t a fiduciary because the fund calls itself a “research service,” and see how that conversation goes. Proxy advisers have gotten away with something close to that argument since the Reagan administration.

Here’s what changed. ISS and Glass Lewis together control more than 90% of the proxy advisory market. Their recommendations guide how pension funds, mutual funds, and 401(k) plan sponsors vote on board elections, executive pay, and shareholder proposals covering thousands of public companies every year. When the Antitrust Division granted ISS its 1987 clearance, the letter rested on one condition: ISS would advise on voting and governance questions only and would stay out of company operations. That condition no longer describes ISS’s business. The firm now sells corporate consulting services to many of the same companies it evaluates for its clients’ votes, and the Division said plainly that this “direct conflict with the language in the Letter” is why the clearance had to go.

That’s not a technicality. A firm advising a board on strategy while grading that same board’s governance for outside investors has built itself into a conflict of interest, one that carried a Justice Department stamp of approval until last week.

The Labor Department’s Technical Release 2026-01 works the other side of the same problem. Under ERISA’s longstanding five-part test, a person is an investment advice fiduciary when he provides advice about plan assets for a fee, on a regular basis, under a mutual understanding that the advice will serve as a primary basis for decisions. Labor’s guidance says proxy advisers routinely satisfy every part of that test, meaning they owe ERISA-covered retirement plans the same duty of loyalty and duty of prudence that applies to any other investment professional. That’s not a new legal standard. It’s a specific application of language that has sat in the statute since 1974: a fiduciary must act solely in the interest of the participants and beneficiaries.
Both agencies trace back to the same source: President Donald Trump’s December 2025 executive order directing federal regulators to examine whether foreign-owned proxy advisers were exercising shareholder rights for political rather than financial reasons. Skeptics will call that framing, and they’re entitled to. But framing doesn’t change arithmetic. A five-part fiduciary test is either satisfied, or it isn’t. A 90% market share is either concentrated or it isn’t. Neither question turns on who signed the executive order.

This is the same logic that broke up Standard Oil more than a century ago, minus the kerosene. When two firms control the overwhelming share of a market that shapes governance decisions for the country’s largest public companies, that isn’t competitive discipline. That’s a duopoly holding the pen on other people’s money.

The comfort letter ISS relied on for 39 years assumed the firm would stick to advising how people vote, not advising companies how to run themselves. That assumption aged about as well as anything else written in 1987 and left untouched since.

Plan sponsors who outsourced their proxy voting obligations to ISS or Glass Lewis without auditing that arrangement against the five-part test are carrying legal exposure they may not know they have. The test doesn’t care what a firm calls itself. It cares what a firm does. ISS and Glass Lewis do the second one. Regulators finally noticed. The people who hired these firms to vote their retirement money should notice too.

By Jay Rogers

Jay Rogers is a financial professional with more than 30 years of experience in private equity, private credit, hedge funds, and wealth management. He has a BS from Northeastern University and has completed postgraduate studies at UCLA, UPENN, and Harvard. He writes about issues in constitutional law, national security, human nature, and public policy.