FACTS
Setting the Record Straight
FACTS
For more than a quarter of a century, ISS has been a regulated entity, subject to oversight by the U.S. Securities & Exchange Commission as a Registered Investment Adviser.
ISS’ clients are sophisticated institutional investors, including asset managers and asset owners. ISS does not serve retail or individual investors directly.
ISS provides advice and voting recommendations, not dictates. As an example, while the ISS Benchmark Policy recommended against roughly 12 percent of say-on-pay resolutions for the top 3,000 U.S. companies in calendar 2024, just 1 percent failed to pass. These numbers underscore that investors make up their own minds. In addition, ISS does not have a single, monolithic view of governance matters; instead, it offers and applies different proxy voting guidelines meeting the varying requirements of different clients and, in fact, the ISS vote recommendations on any particular matter may differ from client to client depending on the policies being applied.
ISS tailors its research and analysis to the needs of these sophisticated institutional investor clients. Our investor clients have a variety of perspectives on investing and on the criteria and priorities that are important to them. As such, the criteria through which ISS analyzes management and shareholder proposals are chosen by ISS’ institutional investment clients, not ISS.
Ultimately, sophisticated institutional investor clients, rather than ISS, ultimately determine how their votes are cast.
ISS is an impartial, federally regulated service provider to institutional investors who direct and control their own proxy voting decisions. It is not an activist or advocacy organization. Our mission is to provide high-quality, independent, and timely proxy research and advice based on the voting guidelines that our clients, not we, select. As a federally registered investment adviser, ISS understands what it means to be a fiduciary, which is why our proxy vote recommendations and other advice are tailored to the preferences and interests of our clients. Many of our clients believe that governance, environmental or other factors can be financially material to their investment decisions. In 2024 and for S&P500 constituents, ISS’ benchmark policy supported just 39 percent of all shareholder proposals characterized as “environmental” or “social” while supporting 96 percent of management resolutions. By comparison and in calendar 2022, it was 52 percent and 97 percent, respectively. This is hardly the track record of an activist or advocacy organization pushing an ESG or any other politicized agenda.
Approximately 90% of voted shares processed by ISS globally are tied to voting policies customized by the investor, instead of utilizing ISS’ Benchmark or Specialty policy options.
ISS voting recommendations reflect how its institutional investor clients want to vote the shares they own or manage in public companies, and the factors they deem most relevant to those voting decisions. Clients can choose these criteria by choosing from a wide array of voting guidelines, including ISS’ Benchmark policy, which is developed with input from investors and public comment, thematic ISS policies for those focused on faith-based investing, governance, or other such considerations, or customizable policies reflecting a client’s specific considerations. Clients not only choose their voting policy, but they also receive reports outlining the rationale underlying ISS’ recommendations and do not always choose to vote in accordance with its recommendations. Clients also may elect to receive shareholder meeting research that is informational only and does not include voting recommendations.
ISS has implemented a firewall to segregate the work of ISS-Corporate, the business unit which provides products and services to publicly traded companies, from the ISS teams preparing research on publicly traded companies.: ISS Research works independently of ISS-Corporate.; ISS-Corporate is physically separated and is separately managed.; ISS Research team members do not know the identity of ISS-Corporate clients,; and ISS-Corporate maintains a “Blackout Period” during an issuer’s solicitation so that it does not sell to issuers during that period. To provide transparency and demonstrate the independence of our proxy research, ISS discloses to institutional clients the identity of all ISS-Corporate subscribers, the types of products and services they receive, and the fees paid to ISS-Corporate.
Most ISS policies are in fact applied on a case-by-case basis. What this means is that there may be multiple factors ISS will consider on many of the issues we analyze, and we’re very clear to the market on what they are.
~98% of proxy vote ballot items at U.S. meetings are company management resolutions, and institutional investors overwhelmingly vote (90%+) with the recommendations of a company's Board of Directors.
Shareholder proposals represent a minority of vote ballot items, are almost always non-binding, and most are proposed at S&P500 companies.The ISS Benchmark policy voting aligned with board recommendations on management-sponsored resolutions approximately 96 percent of the time for S&P500 companies during the 2025 proxy season.
Investors proactively and freely retain ISS, a registered investment adviser, to identify, curate, verify, and analyze information they require to pursue their unique investment objectives. ISS’ customizable products and services are designed based on investor demand for objective high-quality data and analyses tailored to differentiated investment criteria that they specify. With nearly 4,000 employees worldwide, ISS provides investors with efficient and cost-effective means to aggregate, synthesize, and review information based on their own respective investment approaches for the thousands of ballot items considered at shareholder meetings of investors’ portfolio companies each proxy season.
Shareholder proposals represent a minority of vote ballot items, are almost always non-binding, and most are proposed at S&P500 companies.
Four proxy advisers operating in the U.S. are registered as investment advisers (RIAs) with the SEC.
ISS and three other proxy advisers are registered under the Investment Advisers Act and are subject to regulation by the SEC. It would be false to suggest ISS operates without regulation.
The Advisers Act establishes a fiduciary standard of conduct that follows the contours of the contractual relationship between a proxy adviser and its institutional investor clients.
The Advisers Act covers many factors, including the disclosure of both the methods of analysis and policies and procedures used in formulating proxy voting advice.
The D.C. Circuit Court confirmed that the “SEC is ...empowered to regulate the provision of proxy-voting advice through the Investment Advisers Act…” in its opinion in ISS v. SEC stemming from ISS’ lawsuit on the 2020 SEC rules regulating proxy voting advice as a proxy solicitation. The Court affirmed that the provision of independent voting advice does not constitute a proxy solicitation.
ISS and its majority shareholder, Deutsche Borse Group (DBG), have adopted a Policy on Non-Interference and Potential Conflicts of Interest Related to DBG to establish appropriate standards and procedures to protect the integrity and independence of the research, recommendations, ratings, and other analytical offerings produced by ISS. Pursuant to the policy, neither DBG nor its employees may participate, seek to influence, or have any role in the formulation, development, and preparation of the ISS research offerings, nor engage with ISS employees with respect to the preparation of any company-specific research offering. More fundamentally and when more broadly considering stakeholders, including clients, it is critical to note that ISS is a policy-based organization, so any proposal, no matter who is filing it, must be measured against that policy, which is publicly disclosed.
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For more information about Institutional Shareholder Services (ISS), please visit the ISS website at https://www.issgovernance.com/about/about-iss/.