Texas Attorney General Ken Paxton has initiated an investigation into proxy advisory firms Glass Lewis and Institutional Shareholder Services (ISS). The inquiry alleges that these firms may have misled investors by recommending votes for companies that implement diversity, equity, and inclusion (DEI) and sustainability policies.
In an official statement, Paxton criticised the firms for “issuing voting recommendations that advance radical political agendas rather than sound financial principles,” and claimed that neither Glass Lewis nor ISS supported their guidelines with economic analysis, instead offering “a word salad of corporate lingo.”
This investigation follows a preliminary injunction issued by a federal judge last month, which blocked the enforcement of a Texas law intended to limit how Glass Lewis and ISS could provide advice on environmental, social, and governance (ESG) practices. The judge ruled that the law likely infringed upon the firms’ First Amendment rights.
The Attorney General’s office accused Glass Lewis and ISS of routinely issuing proxy voting recommendations that conflict with the financial interests of their fiduciaries. Examples cited include their guidance for investors to support companies adopting DEI initiatives, gender-based hiring quotas, and aggressive climate policies.
Paxton remarked that “proxy advisors play a massive role in shaping corporate governance decisions in our country, affecting tens of billions of dollars. 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.”
In response, a Glass Lewis spokesperson stated that the Attorney General’s announcement “mischaracterises Glass Lewis’ advice and business practices.” The firm maintains that its recommendations are based on extensive research aimed at promoting long-term shareholder value.
The spokesperson further explained that Glass Lewis provides “independent, research-driven proxy advice exclusively to highly sophisticated institutional investors—not to the general public—who select the considerations important to them based on their fiduciary duties, investment strategies, and risk tolerances.” The spokesperson also noted that a federal district court in Texas has enjoined the Attorney General from targeting Glass Lewis for its constitutionally protected speech.
