If you're Elon Musk, Thursday was a pretty good day. President Donald Trump signed an executive order directing the Securities and Exchange Commission to review the practices of ISS and Glass Lewis, the two firms that essentially run the proxy advisory business in America.
Here's why this matters: When big institutional investors need to vote on corporate decisions at thousands of companies, they often rely on guidance from proxy advisors. ISS and Glass Lewis dominate this space, advising major players like BlackRock, pension funds, and asset managers on how to cast their votes. Their recommendations carry serious weight.
Musk's Long-Running Grudge
Musk has been publicly frustrated with these firms for years. Both ISS and Glass Lewis have recommended that Tesla (TSLA) investors vote against certain corporate decisions, including Musk's massive compensation package. When proxy advisors tell shareholders to vote no on your pay, it tends to stick with you.
According to CNN, Trump's executive order specifically takes aim at how these firms incorporate diversity, equity and inclusion (DEI) and environmental, social and governance (ESG) policies into their recommendations. For corporate leaders who've pushed back against ESG mandates, this represents a significant shift in the regulatory winds.
The Antitrust Question
The executive order goes beyond just a review. It also instructs the Federal Trade Commission to investigate whether ISS and Glass Lewis are violating antitrust laws. This follows a lawsuit from Florida's attorney general, James Uthmeier, who sued the firms over alleged violations of state antitrust laws.
It's worth noting that both firms are foreign-owned. ISS is owned by a German company, while Glass Lewis is Canadian-owned. Their outsized influence over American corporate governance has drawn scrutiny from various states and political constituencies.
What Happens Next
The real question is whether this review leads to actual changes in how proxy advisors operate. These firms play an essential role in helping institutional investors navigate thousands of voting decisions, but their influence has become a flashpoint in debates over corporate governance.
For Tesla and Musk specifically, any changes could shift the dynamics when controversial decisions come up for shareholder votes. The balance of power between corporate leaders and the advisors who guide shareholder votes may be about to shift.