Proxy Advisors.

01 What proxy advisors do

Plain English — Academic framing — Methodology terminology

Plain English. Proxy advisors are research firms. Institutional investors — mutual funds, pension funds, index funds — hire them to analyze company ballots and recommend how to vote on director elections, executive-pay plans, mergers, charter amendments, shareholder proposals, and proposals to move the company’s state of incorporation. The recommendations can matter, especially when a vote is close, contested, or technical. But proxy advisors are not shareholders, do not sit on boards, and do not decide the legal effect of a vote. Their influence runs through investor voting behavior.³

Academic framing. Proxy-advisory firms are voting-information intermediaries in the shareholder-franchise system. Their effect on outcomes is an empirical question: recommendation direction, investor reliance, proposal type, issuer size, contestedness, and institutional-ownership mix all affect observed vote movement. The legal question is now live as well: federal proxy-solicitation rules, state disclosure mandates, First Amendment litigation, state consumer-protection pleadings, and issuer rebuttal filings increasingly treat proxy advice as a regulated governance channel.⁴

Institutional Shareholder Services (ISS) — wholly owned by Deutsche Börse via STOXX since February 2021 — and Glass Lewis — acquired by Peloton Capital Management and Stephens Inc. in 2021 — together advise institutional investors on the substantial majority of U.S. proxy ballots.⁵ The classic empirical treatments (Choi, Fisch & Kahan, 59 Emory L.J. 869 (2010); Malenko & Shen, 29 Rev. Fin. Stud. 3394 (2016); Rose, 32 J. Corp. L. 887 (2007)) report advisor vote-effect ranges from low single digits to twenty-plus percentage points depending on ballot item, methodology, and identification strategy — SMU CGI cites each effect-size estimate to the specific study that supports it rather than collapsing them into a single headline number.⁶

1.1  Methodology terminology — advisor-following vote share, not “robovote”

SMU CGI uses the term advisor-following vote share — operationally, the share of institutional votes that aligns with the proxy advisor’s recommendation on a given ballot item, sensitive to ballot-question characteristics and identification strategy (see Malenko & Shen 2016’s regression-discontinuity approach) — in formal data products rather than the colloquial “robovote.” The replacement is methodological, not branding: robovote is litigation-tainted and loose; advisor-following vote share is a ballot-item-level statistic that does not by itself entail causal inference. Causal inference requires design assumptions or instruments.⁷

02 The five-layer build map

Live: regulation & litigation — Building: empirical layers 01–04

The vertical organizes its coverage into five layers. Each layer is primary-source-backed and re-runnable. The Texas regulatory cycle accelerated the need to ship the legal layer first; Layer 05 is therefore live as of May 2026, ahead of the originally scheduled Q1 2027 launch of the empirical infrastructure. The four empirical layers continue to build toward Q1 2027 cadence and are reported here with explicit status indicators.⁸

03 The institutional landscape — ISS vs. Glass Lewis

Ownership — scope — methodology — sunset posture — active litigation

ISS and Glass Lewis differ in ownership, methodology posture, and litigation profile in ways that matter for the regulatory and empirical questions this vertical tracks. Figure 3 maps the differences across eight dimensions.⁹

04 The 2025 regulatory shock — Texas S.B. 2337 / TBOC ch. 6A

Signed June 20, 2025 — Effective Sept. 1, 2025 — Codified at TBOC ch. 6A

Texas S.B. 2337, 89th Legislature, R.S. (2025), signed June 20, 2025 and effective September 1, 2025, added new TBOC Chapter 6A — Proxy Advisory Services. The statute defines proxy advisor, proxy advisory service, proxy proposal, and company proposal; treats a proxy-advisory service as not provided solely in shareholders’ financial interest if it is based wholly or partly on nonfinancial factors (ESG, DEI, social-credit or sustainability factors, or certain organization/group commitments); requires written economic analyses for certain shareholder-sponsored proposals; imposes notice and disclosure obligations to recipients and companies; and treats violations as deceptive trade practices under the Texas Deceptive Trade Practices Act (Tex. Bus. & Com. Code ch. 17).¹⁰

05 Two-track enforcement — federal PI ‖ state DTPA

Track A: federal S.B. 2337 challenge — Track B: state DTPA petition

As of May 20, 2026, proxy advisors are direct objects of state regulation, federal litigation, issuer rebuttals, and conflict-of-interest scrutiny. Two doctrinally distinct enforcement tracks now run in parallel. Figure 4 maps each.¹¹

Track A — federal challenge. On July 24, 2025, the two firms filed parallel federal challenges in the U.S. District Court for the Western District of Texas: Institutional Shareholder Services Inc. v. Paxton, No. 1:25-cv-01160-ADA (W.D. Tex. filed July 24, 2025) (Albright, J.); and Glass, Lewis & Co., LLC v. Paxton (W.D. Tex. filed July 24, 2025) (Albright, J.) (companion challenge; docket number pending CourtListener confirmation).¹² On August 29, 2025, Judge Alan D. Albright issued preliminary injunctions blocking enforcement of S.B. 2337 against the two named plaintiffs. The injunctions are firm-specific — they enjoin the Attorney General and his agents from enforcing the statute as to ISS and Glass Lewis; they do not facially enjoin S.B. 2337 against other proxy advisors (e.g., Minerva Analytics, Egan-Jones, smaller players), and they do not bar private-plaintiff enforcement actions.¹³ Status as of 2026-05-24: trial on the merits was scheduled for February 2, 2026 per Gibson Dunn (Aug. 30, 2025); current docket posture pending CourtListener verification.

Track B — state DTPA petition. On May 20, 2026, the Office of the Texas Attorney General announced suit against ISS in Collin County District Court (petition PDF; the specific press-release slug is pending verification — SMU CGI will substitute the direct release URL when confirmed). The petition is brought under the Texas DTPA and TBOC registration provisions, and alleges that ISS misled institutional investors and public companies by issuing voting recommendations that, in the State’s framing, prioritize political agendas over financial principles and fiduciary duty. The State seeks a temporary restraining order, temporary and permanent injunctive relief, civil penalties up to $10,000 per violation, and total monetary relief greater than $1,000,000.¹⁴ The State’s pleadings are allegations, not adjudicated findings.

06 The eleven-month timeline

June 20, 2025 (S.B. 2337 signed) → May 20, 2026 (Texas AG v. ISS)

Twelve events across six institutional actors define the regulatory and litigation arc this vertical tracks. Figure 2 plots each in chronological order; the actor lanes (Legislature / Plaintiffs / Court / Firm / Texas AG / Investors / Issuer) make visible which institutional party initiated which move.¹⁵

07 Conflict-of-interest taxonomy

Four categories — different evidentiary burdens, different legal implications

A page that tracks both long-standing structural conflicts (consulting; ownership) and a newer litigation-posture conflict allegation needs a coding rule. SMU CGI uses a four-category taxonomy. Each category carries a different evidentiary burden: Categories 1 and 2 are structural and disclosed; Category 3 is methodology-level; Category 4 emerged for the first time in May 2026 and remains pleaded, not adjudicated.¹⁶

08 The ExxonMobil DEFA14A case study — Category 4 leading example

May 12, 2026 — May 15, 2026 — Issuer-alleged litigation-posture conflict

On May 12 and May 15, 2026, ExxonMobil filed two DEFA14A supplemental proxy disclosures (accessions 0001193125-26-219320 and 0001193125-26-226496) criticizing ISS’s recommendation against ExxonMobil’s New Jersey→Texas redomiciliation proposal. ExxonMobil alleges — in a regulatory-filing form — an undisclosed Category 4 conflict (litigation- and regulatory-posture conflict) arising from ISS’s ongoing federal litigation against the Texas Attorney General. ExxonMobil’s filings further state that, since S.B. 2337’s enactment, ISS had recommended against every identified Texas redomiciliation reviewed by the company. SMU CGI treats both as issuer-side allegations in regulatory-filing form. They are primary sources for what ExxonMobil said; they are not adjudicated findings of conflict or undisclosed bias.¹⁷

Independent contemporaneous reporting (which SMU CGI cites as secondary context, not as the URL target for the filings themselves): Exxon Blasts Proxy Advisers for Conflict of Interest in Fight Over Texas Move, Wall Street Journal (May 21, 2026) (Eaton); Texas AG Files Lawsuit Against ISS in Ongoing Proxy Battle, Responsible Investor (May 21, 2026).¹⁸

8.1  Federal proxy-advice rule history — NAM v. SEC

Layer 05 also tracks the federal proxy-advice rule history. The operative provisions are: 17 C.F.R. § 240.14a-2(b)(9) (the SEC’s 2020 notice-and-awareness amendments codifying proxy-advisor obligations); the SEC’s July 2022 final rule rescinding key 2020 provisions; and National Association of Manufacturers v. SEC, No. 22-51069 (5th Cir. June 26, 2024), which vacated the 2022 rescission as arbitrary and capricious — restoring portions of the 2020 framework.¹⁹

09 What we don’t know yet — open empirical questions

Empirical, doctrinal, methodological — explicit list of items not yet adjudicated or tested

SMU CGI’s gold-standard rule is to be explicit about what the page does not show. The following items are open as of 2026-05-24 and are flagged here rather than papered over:²⁰

10 Proxy Advisors across SMU CGI

Five SMU CGI properties that intersect with this vertical

The proxy-advisor question lives at the intersection of redomiciliation outcomes, business-court adjudication, weekly regulatory monitoring, the ExxonMobil case, and the Texas Corporate Law architecture. Each property below carries its own primary-source discipline and is updated independently.²¹

Explanatory note. Citations follow Bluebook 21st edition with pin cites and explanatory notes per SMU CGI project protocol. Every footnote source carries an active hyperlink to its primary host; practitioner alerts (Gibson Dunn, Skadden, Akin Gump, Harvard CorpGov) appear only as secondary commentary, never as URL targets for statutes, cases, agency rules, or court orders. Page status: published 2026-05-24; status chips reflect verification posture at that date; live regulatory tracker continues to update.