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Institutional Shareholder Services

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Institutional Shareholder Services Inc.
IndustryInvestment Management
Founded1985
HeadquartersRockville, Maryland, United States
Key people
Gary Retelny (CEO)
ServicesProxy advisory
SRI advisory
Corporate governance
Market intelligence
SubsidiariesISS-Ethix
FWW Fund Services[1]
Websiteissgovernance.com

Institutional Shareholder Services Inc. (ISS) is a proxy advisory firm. Hedge funds, mutual funds and similar organizations that own shares of multiple companies pay ISS to advise (and often vote their shares) regarding share holder votes. As the leading firm in the industry, ISS commands a 48 percent market share as of 2021, with its nearest rival, Glass Lewis, holding a 42 percent market share.[2]

In response to ISS's recommendations to vote against fee-shifting provisions in the event of securities fraud litigation, some have criticized ISS and suggested that it needs to be regulated.[3]

History

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ISS was founded in 1985.[4][5]

With Disney announcing the combination of the CEO and chairman positions on October 6, 2011, past the date of shareholder proposal deadline, and increase CEO/chair pay, ISS called for a no vote against the four Nominating and Governance Committee board members at the 2012 annual meeting.[6] ISS recommended to clients two candidates nominated by billionaire investor Carl Icahn to the drugmaker Forest Laboratories’ board of directors in a 2012 proxy contest.[7]

In 2013 ISS agreed to pay the SEC a fine of $300,000 and retain an independent compliance consultant to settle charges that it failed to safeguard the confidential proxy voting information of clients.[8] ISS was highlighted in a 2014 opinion piece in the New York Times by Cornell University law professor Lynn Stout as having an outsized power in the selection of CEOs of major corporations in the United States with ramifications for the U.S. economy.[9] It was owned by MSCI until April 30, 2014 when it was purchased by Vestar Capital Partners.[10]

Ethix SRI Advisors was purchased by ISS to help ISS expand into Europe. Ethix was renamed with the acquisition to ISS-Ethix and would lead ISS's sustainable and responsible investment activities.[11] In 2017, ownership of ISS switched to Genstar Capital.[12] In March 2018, ISS also acquired the German ESG rating agency oekom research AG.[13] In November 2020 Deutsche Börse announced the acquisition of a majority in ISS-shares for about 1.5 billion Euro.[14]

Acquisitions

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In September 2015, ISS acquired Ethix SRI Advisors, a provider of sustainable and responsible investment (SRI) research and solutions such as corporate engagement, screening, monitoring and assessing companies’ performance.[15]

In January 2017, ISS acquired IW Financial, a U.S.-based firm offering environmental, social, and governance (ESG) research, consulting, and portfolio management solutions.[16]

In June 2017, ISS acquired Climate Neutral Investments (CNI), the Investment Climate Data division of the South Pole Group.[17]

In February 2018, ISS acquired EVA Dimensions, a provider of cash-flow-based analysis of corporate performance.[18]

In March 2018, ISS acquired oekom AG, a provider of environmental, social, and governance (ESG) ratings and data.[19]

In February 2019, ISS acquired CAER, a Canberra-based research company that has worked with institutional investors seeking to monitor portfolio companies’ ESG policies, practices, and disclosures since 2000.[20]

In October 2020, ISS acquired FICO® Cyber Risk Score Business, which helps organizations in their efforts to measure, manage and reduce cyber risk.[21]

In February 2021, ISS acquired ACRe Data, a provider of ESG Scoring for the U.S. Municipal marketplace.[22]

Notes

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  1. ^ "Home". fww.de.
  2. ^ Shu, Chong. "The Proxy Advisory Industry: Influencing and Being Influenced." Journal of Financial Economics 154, (2024): 103810. Accessed March 17, 2024. https://doi.org/10.1016/j.jfineco.2024.103810.
  3. ^ "Shareholder Litigation Without Class Actions". Arizona Law Review. 57 (1): 213. 2015. Retrieved 18 November 2019.
  4. ^ Hoffman, Liz (18 March 2014). "Vestar Buys Institutional Shareholder Services From MSCI for $364M". Wall Street Journal. Retrieved 13 January 2024.
  5. ^ StreetJournal, Monica LangleyStaff Reporter of The Wall (6 June 2003). "ISS Rates Firms -- and Sells Roadmap to Boosting Score". Wall Street Journal. Retrieved 13 January 2024.
  6. ^ Chmielewski, Dawn C. (March 2, 2012). "Proxy advisor criticizes Disney CEO Iger's new chairman title". Los Angeles Times. Retrieved February 18, 2016.
  7. ^ "Forest Labs shareholders elect 1 of 4 board nominees from investor Carl Icahn". August 15, 2012.[dead link]
  8. ^ "SEC Charges Institutional Shareholder Services in Breach of Clients' Confidential Proxy Voting Information". SEC. 2013-05-23.
  9. ^ Lynn Stout (September 14, 2014), To Increase Investment, Change the Definition of 'Shareholder Value'
  10. ^ "Vestar Capital Partners Completes Acquisition of Institutional Shareholder Services". ISS press release. April 30, 2014.
  11. ^ Brown, Adam (September 15, 2015). "ISS acquires Scandinavia-based SRI adviser Ethix". IR Magazine. Cross Border Ltd. Retrieved February 18, 2016.
  12. ^ "Genstar Capital, in Partnership with Management, Announces Acquisition of Institutional Shareholder Services from Vestar Capital Partners". ISS press release. September 7, 2017.
  13. ^ "oekom research AG to Join Institutional Shareholder Services". ISS press release. March 15, 2018.
  14. ^ "Deutsche Börse kauft Stimmrechtsberater ISS für 1,5 Milliarden Euro". Handelsblatt. November 17, 2020.
  15. ^ "ISS acquires Scandinavia-based SRI adviser Ethix". www.irmagazine.com. Retrieved 2022-10-19.
  16. ^ shannonroberts (2017-01-05). "ISS Announces Acquisition of IW Financial". Vestar Capital Partners. Retrieved 2022-10-19.
  17. ^ Finance, Next. "News - ISS Announces Acquisition of Investment Climate Data Advisory Division of South Pole Group". Next Finance. Retrieved 2022-10-19.
  18. ^ Bragg, Sanford (2018-02-13). "ISS Acquires EVA Dimensions After ESG Success • Integrity Research". Integrity Research. Retrieved 2022-10-19.
  19. ^ "oekom research to Join Institutional Shareholder Services". www.csrwire.com. Retrieved 2022-10-19.
  20. ^ Mitchell, James (2019-02-18). "Proxy giant ISS bolsters ESG muscle with Aussie acquisition". www.investordaily.com.au. Retrieved 2022-10-19.
  21. ^ MarketScreener. "Fair Isaac : FICO to Sell Cyber Risk Scoring Business to Institutional Shareholder Services | MarketScreener". www.marketscreener.com. Retrieved 2022-10-19.
  22. ^ Segal, Mark (2021-02-01). "ISS Acquires Muni Bond ESG Scoring Provider ACRe Data". ESG Today. Retrieved 2022-10-19.
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