Attorney General Ken Paxton has launched an official investigation into proxy-advisory giants Glass Lewis & Co. and Institutional Shareholder Services Inc. His investigation is focusing on whether the firms have misled institutional investors and public companies by advocating for radical political agendas over sound financial principles.
Glass Lewis and ISS together control more than 95 percent of the global proxy-advisory services market.
Their recommendations play a decisive role in shaping corporate governance, as institutional investors and large public companies often rely on this guidance to determine how they vote on key business and policy issues. These decisions can influence tens of billions of dollars and set precedents in corporate America.
According to Paxton’s announcement, both Glass Lewis and ISS have routinely advised shareholders to back initiatives focused on diversity, equity, and inclusion (DEI), gender-based hiring quotas, and aggressive climate activist policies.
Paxton alleged that such advice is often only supported by a “word salad of corporate lingo” and unsupported by economic analysis. Because of this, he suggested their advice may not align with the fiduciary interests of shareholders or the long-term financial health of companies.
Paxton described the proxy-advisor duopoly as sacrificing financial guidance in pursuit of left-wing political goals, which he characterized as “cheating not only investors but the American people as a whole.”
He argued this practice amounts to a dangerous intrusion of ideological considerations into the financial system, warning of the broad influence proxy advisors wield over the national economy.
As part of the investigation, Paxton’s office has issued civil investigative demands to both firms. The probe will examine whether Glass Lewis and ISS have violated Texas consumer protection laws, especially those that govern disclosures of material facts to investors and companies.
The investigation comes amid ongoing national debates about the outsized influence of proxy-advisory firms.
Critics point out that “robovoting”—the practice of large funds blindly following proxy-advisor recommendations without independent analysis—may be undermining shareholder democracy and introducing uniformity that does not reflect diverse investor views. Others have raised concerns about potential conflicts of interest, given that some proxy advisors provide both consulting services to companies and voting recommendations to investors.
ISS and Glass Lewis regularly update their proxy-voting guidelines, which cover a range of issues including diversity, ESG (environmental, social, and governance) policies, and executive compensation.
While some investors welcome these recommendations as promoting responsible governance, others see them as advancing political causes at the expense of shareholder value.
“My office has zero tolerance for these woke corporations smuggling radical, liberal ideology into the companies they advise and into the entirety of America’s financial system,” stated Paxton.
The Texas attorney general’s office is seeking to determine whether Glass Lewis and ISS have breached their legal and fiduciary duties.
This investigation marks yet another front in a broader campaign by state officials to challenge the politicization of corporate governance and investment advice.
An ISS spokesperson told Texas Scorecard, “ISS is confident that it has complied with all applicable laws and will vigorously defend itself from any allegations of wrongdoing.”
Glass Lewis & Co. did not respond to Texas Scorecard’s request for comment before publication.
