V10 · Stream 06 · Channel 3
Active regulatory pressureProxy-advisor regulation: the vote-advice channel under pressure.
The Federal Trade Commission opened an antitrust investigation of Institutional Shareholder Services and Glass Lewis in 2025, focused on potential coordination on voting recommendations — particularly on climate and social proposals. SEC Rule 14a-2(b) amendments adopted in 2020 (and partially rescinded in 2022) provide the substantive federal-securities-law framework. State legislation in Texas, Florida, and other states adds a parallel state-law regulatory layer. The vote-advice channel is in the most active regulatory environment of the post-Dodd-Frank era.
Why this stream lives here
V08 covers the empirical layer. V10 covers the regulatory pressure.
The V08 Proxy Advisors vertical — /research/proxy-advisors/ — is the SMU CGI empirical-tracker home for proxy-advisor recommendation databases, methodology comparison, dissent-rate analysis, and the "ISS effect" measurement program. That is where the recommendations themselves are tracked and analyzed.
This V10 stream covers the same institutions from a different angle: as the vote-advice channel of the shareholder-governance contest, and specifically the regulatory pressure environment that has reshaped how that channel operates in the 2025–2026 period. The 2025 FTC antitrust investigation, the 2020-era SEC Rule 14a-2 amendments and their partial rescission, and the parallel state-law efforts to regulate proxy advisors all sit here.
The two treatments cross-reference each other. The V08 empirical work is the citable evidence base; this V10 page is the citable regulatory-environment primary.
The FTC investigation
Antitrust scrutiny of ISS and Glass Lewis.
In 2025, the Federal Trade Commission opened an antitrust investigation of Institutional Shareholder Services (ISS) and Glass Lewis. The investigation's stated focus, per FTC docket materials and contemporaneous reporting, is potential coordination between the two firms on voting recommendations, particularly on climate-and-environmental proposals and on social-and-DEI proposals. The investigation also addresses the broader question of whether the proxy-advisory market structure — two firms collectively providing voting recommendations to a substantial majority of institutional investors — raises Section 1 Sherman Act or Section 5 FTC Act concerns.
The market-concentration question.
The institutional-investor proxy-voting market is structurally concentrated. ISS holds an estimated 60–65% market share by client revenue; Glass Lewis holds an estimated 25–30%. Smaller advisors (Egan-Jones, Minerva, others) make up the remaining 10%. The concentration is doctrinally significant for two reasons. First, the duopoly raises Section 7 Clayton Act questions if there were ever to be a proposed merger. Second — and more directly relevant to the 2025 investigation — the concentration creates the structural conditions under which coordinated voting recommendations on substantive matters (climate, social, governance) could materially affect outcomes at portfolio companies.
The coordination question.
Coordination need not be explicit to raise antitrust concerns. The 2025 investigation's working theory, per docket materials, is that ISS and Glass Lewis have developed parallel methodologies on climate-and-social proposals that produce highly-correlated recommendations across a substantial portion of the Russell 3000 voting universe. Whether that parallelism reflects: (a) independent application of broadly-similar methodologies to similar underlying corporate facts, (b) information-sharing through shared client-disclosure channels (institutional-investor stewardship reports), or (c) more direct coordination, is the principal empirical question the investigation is designed to resolve.
The remedy question.
If the FTC concludes the firms have coordinated, the available remedies include: (i) structural relief (forced divestiture of certain business lines or shared infrastructure), (ii) behavioral relief (consent decrees prohibiting specified forms of information-sharing or coordination), (iii) policy disclosure requirements (mandating clearer methodology disclosures that enable client-level customization), or (iv) referral to the SEC for rulemaking under Rule 14a-2. The choice among these remedies has substantially different implications for the proxy-advisory market structure.
Status · investigation ongoing
As of mid-2026, the FTC investigation is ongoing. No formal enforcement action has been filed. Both ISS and Glass Lewis have publicly stated that their methodologies are independently developed and their recommendations independently issued; they have committed to cooperate with the investigation. The empirical-resolution timeline depends on FTC discovery practice and is not externally predictable; investigations of this complexity typically run 18–36 months.
The SEC Rule 14a-2 framework
The 2020 amendments and the 2022 partial rescission.
The SEC's regulatory framework for proxy advisors operates through two principal levers in Rule 14a-2. First, the rule defines whose communications constitute "solicitation" for purposes of Section 14(a) of the Exchange Act and therefore are subject to the full proxy-solicitation framework. Second, the rule's subsection (b) exemptions identify which communications are exempt from that full framework. Proxy-advisor recommendations have historically been treated as exempt from the full proxy-solicitation framework on the basis that they are independent advice to subscribing clients, not direct solicitation.
The 2020 amendments.
In July 2020 the SEC adopted amendments to Rule 14a-2 that, for the first time, treated proxy-advisor voting recommendations as "solicitation" under Section 14(a) and codified specific conditions on the exemption proxy advisors must meet to continue operating under the historical voluntary framework. The principal conditions were: (i) a written-policy commitment to provide registrants with their recommendations reasonably in advance of dissemination to subscribing clients, (ii) a mechanism for registrants to provide a written response that subscribing clients receive, and (iii) compliance with conflict-of-interest disclosure requirements. The amendments substantially extended SEC regulatory reach over the proxy-advisory market for the first time.
The 2022 partial rescission.
In July 2022 the SEC under a new Commission rescinded the 2020 amendments' principal new operative requirements, returning the proxy-advisor regulatory framework substantially to the pre-2020 status quo on the most contentious provisions. The 2022 rescission did not eliminate the 2020 amendments' definitional treatment of proxy-advisor recommendations as solicitation under Section 14(a); that definitional change remained in place. But the operative conditions on the Rule 14a-2(b) exemption were narrowed back toward the pre-2020 voluntary-disclosure framework.
The 2025-2026 regulatory environment.
The Atkins-led SEC has signaled openness to revisiting the 2022 rescission and reinstating or modifying portions of the 2020 framework. The December 2025 Executive Order on shareholder proposals (which is principally focused on Rule 14a-8 but operates as a broader signal to the SEC on shareholder-governance rulemaking) creates a policy environment in which Rule 14a-2 rulemaking on proxy advisors is institutionally plausible. Whether the SEC initiates such rulemaking is the principal open federal-regulatory question for the proxy-advisor channel.
The state-law parallel layer
Texas, Florida, Tennessee: state-law regulatory pressure.
Beyond the federal regulatory framework, several states have enacted or are considering state-law regimes that regulate proxy advisors' interactions with state-pension and state-investment-board clients. Texas, Florida, and Tennessee have been particularly active in this space; the structural pattern is to require proxy advisors that contract with state-affiliated institutional clients to satisfy state-law disclosure, conflict-of-interest, or recommendation-policy conditions.
The Texas state-law context.
Texas's broader corporate-law and pension-fund regulatory framework has been increasingly oriented toward limiting ESG-related institutional-investor influence on Texas-incorporated portfolio companies. The TBOC's source-of-law principle (TBOC § 1.056) and the post-SB-29 BJR codification both reinforce a Texas-first posture that interacts with proxy-advisor recommendations on Texas-incorporated firms. Whether Texas adopts state-law proxy-advisor regulations on the model of Florida or Tennessee — or relies primarily on the federal framework and the underlying corporate-law architecture — is an open question for the next Texas legislative session.
The fragmentation question.
State-level proxy-advisor regulations create the potential for inconsistent or conflicting state-law obligations across the proxy-advisory firms' multi-state client bases. ISS and Glass Lewis serve clients in all 50 states; state-law regulations in three or four states with conflicting substantive requirements would create operational complications that the federal Rule 14a-2 framework was designed to avoid. The interaction between state-law proxy-advisor regulations and the federal framework is an emerging preemption question that has not been litigated to resolution.
The robovote question
When do recommendations become de facto vote-determinations?
The substantive concern underlying both the FTC investigation and the SEC regulatory framework is the "robovote" phenomenon: the degree to which institutional investors mechanically vote in accordance with proxy-advisor recommendations rather than independently evaluating each proposal. If a meaningful share of institutional voting is automatic-follow-recommendation, then the proxy advisors are de facto exercising the voting power those institutions hold — without bearing the fiduciary obligations that the institutions themselves owe to their beneficial owners.
The empirical record.
Academic and practitioner research has documented robovote rates ranging from 15% to 35% of institutional voting, depending on methodology and proposal-type. The SMU CGI V08 empirical layer is designed to provide a more granular measurement of robovote rates by proposal type, issuer characteristics, and institutional-investor segment. The empirical resolution matters for regulatory design: if robovote rates are low and falling (as pass-through voting expands), the case for aggressive Rule 14a-2 regulation weakens; if robovote rates are high and stable, the case strengthens.
The interaction with pass-through voting.
BlackRock Voting Choice, Vanguard Investor Choice, and other pass-through voting programs (V10 Stream 05 covers the retail-tier analogue) directly address the robovote concern by disaggregating institutional voting power and returning vote-direction authority to underlying beneficial owners. To the extent pass-through voting expands at scale, the proxy-advisor channel's structural role contracts. The competitive dynamics between proxy-advisor recommendations, pass-through voting menus, and issuer-side retail auto-voting are the principal vote-advice-and-execution restructuring of the post-2024 period.
Open questions
What the 2026–2028 horizon will resolve.
1. Does the FTC investigation produce enforcement action?
The investigation's outcome (no action, consent decree, structural relief, referral to SEC) will shape the proxy-advisor market for the next decade. Defense counsel for ISS and Glass Lewis have publicly framed the parallelism between their recommendations as independent application of similar methodologies to similar facts; the FTC's discovery practice will test that framing.
2. Does the SEC revisit Rule 14a-2?
The post-Atkins SEC has signaled openness to revisiting the 2022 rescission. A reinstated 2020-style framework would substantially increase regulatory reach over proxy-advisor recommendations. The principal SEC rulemaking-agenda question for 2026–2027.
3. Do additional states enact state-law proxy-advisor regulations?
Texas, Florida, and Tennessee are the principal first-movers. A 2026–2027 expansion to additional states would create the fragmentation environment that federal preemption doctrine has historically been designed to prevent. The state-vs-federal interaction is the principal doctrinal-structure question on the regulatory side.
4. Does the proxy-advisor channel shrink as pass-through voting and retail auto-voting expand?
The pass-through voting expansion (V10 Stream 05) directly reduces the institutional-aggregated voting power that proxy advisors influence. The retail auto-voting expansion (V10 Stream 05) shifts retail-shareholder voting power toward management. Both dynamics structurally reduce the proxy-advisor channel's relative weight in close-vote outcomes. The empirical resolution will be visible in the post-2026 dissent-rate data.
Primary sources
Where every footnote on this page points.
Per the SMU CGI primary-sources-only rule, every citation on this page hyperlinks the primary source. For the empirical evidence on proxy-advisor recommendations, see V08 Proxy Advisors.
- Federal Trade Commission, Investigation of Institutional Shareholder Services and Glass Lewis (2025; ongoing). The FTC docket on the antitrust investigation of the two principal proxy advisors. Investigation status: ongoing as of mid-2026. https://www.ftc.gov/legal-library
- 17 C.F.R. § 240.14a-2 (proxy solicitation exemption). The federal Rule 14a-2 framework that defines whose communications are subject to the full proxy-solicitation rules. Subsection (b) provides the exemption proxy-advisor recommendations have historically operated under. https://www.ecfr.gov/current/title-17/chapter-II/part-240/subject-group-ECFRfd5f08fcd6fd60a/section-240.14a-2
- SEC Final Rule, Exemptions from the Proxy Rules for Proxy Voting Advice (July 22, 2020). The 2020 amendments treating proxy-advisor recommendations as solicitation under Section 14(a) and codifying conditions on the Rule 14a-2(b) exemption. https://www.sec.gov/rules/final/2020/34-89372.pdf
- SEC Final Rule, Proxy Voting Advice (July 13, 2022). The 2022 partial rescission of the 2020 amendments. Returned the Rule 14a-2(b) operative conditions toward the pre-2020 voluntary-disclosure framework. https://www.sec.gov/rules/final/2022/34-95266.pdf
- 15 U.S.C. § 1 (Sherman Antitrust Act, Section 1). The federal statutory basis for the FTC's coordination-related theories of investigation. https://www.law.cornell.edu/uscode/text/15/1
- 15 U.S.C. § 45 (FTC Act, Section 5). The statutory basis for FTC unfair-methods-of-competition enforcement, including investigations of market structures that produce anticompetitive parallel conduct. https://www.law.cornell.edu/uscode/text/15/45
Continue
Related streams.
V08 · empirical layer
Proxy Advisors · recommendation database
The empirical home for ISS and Glass Lewis recommendation databases, methodology comparison, dissent-rate analysis, and the "ISS effect" measurement program.
V10 · Stream 05
Retail auto-voting
The competing vote-execution channel. As management-aligned retail voting expands, the proxy-advisor-influenced institutional coalition's share of close-vote outcomes contracts.
V10 · landing
Shareholder Franchise and Private Ordering
Return to the V10 landing for the 8-stream map and the channel-by-channel framing.