The Department of Justice (DOJ) has officially withdrawn a 1987 Business Review Letter (BRL) issued to Institutional Shareholder Services (ISS), the largest proxy advisory firm in the United States. This significant development follows a wave of state-level regulatory efforts targeting the proxy advisory industry, a high-profile antitrust lawsuit filed by the Florida Attorney General in November 2025, and a December 2025 executive order from President Trump aimed at re-evaluating the influence of these firms. The withdrawal signals a heightened level of federal and state oversight for an industry that has become increasingly central to corporate governance and shareholder decision-making.
The 1987 BRL had previously provided ISS with a degree of assurance regarding the legality of its core business practice: "offering advice relating to the exercise of voting rights on issues of corporate governance." At the time of its issuance, the DOJ’s assessment was grounded in the nascent stage of the proxy advisory industry and specific representations from ISS that its services would be confined to voting recommendations, explicitly excluding advice on corporate operations or business activities. However, the landscape has dramatically shifted over the past four decades, prompting the DOJ to re-evaluate its earlier position.
Escalating Regulatory and Legal Challenges
The withdrawal of the BRL is not an isolated event but rather a culmination of mounting pressure on proxy advisory firms. At least thirteen states have, as of early 2026, either proposed or enacted legislation imposing new disclosure requirements or other operational obligations on proxy advisors. These state-led initiatives reflect a growing concern among policymakers about the opaque nature and perceived influence of firms like ISS and its primary competitor, Glass Lewis.
A pivotal moment in this escalating scrutiny was the antitrust lawsuit initiated by the Florida Attorney General in November 2025. This legal challenge specifically targets ISS and Glass Lewis, alleging violations of Florida’s antitrust and consumer protection laws. The lawsuit centers on accusations that the two dominant proxy advisors have engaged in coordinated practices that unfairly influence voting outcomes by incorporating environmental, social, and governance (ESG) factors and diversity, equity, and inclusion (DEI) considerations into their recommendations. This aligns with a broader political discourse that has increasingly viewed ESG and DEI initiatives as potentially driven by "politically-motivated agendas" rather than purely fiduciary responsibilities.
Further amplifying this sentiment, President Trump issued an executive order in December 2025 that characterized ISS and Glass Lewis as wielding "substantial power" that could be leveraged to advance such "politically-motivated agendas." The executive order also directed key federal agencies, including the Federal Trade Commission (FTC) and the DOJ, to undertake a comprehensive review of state-led antitrust investigations into whether ISS and Glass Lewis have, in fact, contravened federal antitrust statutes. The DOJ’s decision to withdraw the BRL to ISS directly supports this directive, indicating a federal willingness to actively engage with these concerns.
Understanding Business Review Letters and Their Withdrawal
A Business Review Letter, under federal regulations, represents the DOJ’s contemporary assessment of a proposed business practice under the antitrust laws, outlining its current enforcement intentions. While any entity can request a BRL, and while such a letter does not confer absolute immunity or prevent the DOJ from revisiting its stance, it historically offers a degree of comfort regarding the legality of a business activity. The withdrawal of a BRL, therefore, signifies a significant shift in the DOJ’s perspective, suggesting that the reviewed practice may no longer be viewed as unambiguously compliant with antitrust principles.
The DOJ’s reasoning for withdrawing the 1987 BRL to ISS highlights a nuanced understanding of the proxy advisory market’s evolution. The department explicitly stated that proxy advising itself is not inherently an antitrust violation, and that shareholders exercising their voting rights based on such recommendations does not, in isolation, raise antitrust concerns. The critical factor driving the withdrawal, according to the DOJ, is the consolidated market share held by ISS and Glass Lewis, which collectively exceeds 90% of the U.S. market. This near-monopolistic control allows these firms to exert "tremendous influence" over the corporate governance decisions of publicly traded companies.
Moreover, the DOJ pointed to the significant evolution of ISS’s services and practices since 1987. What began as a specialized advisory role on voting rights has expanded to encompass advice on corporate operations and the provision of broader consulting services. This expansion of scope, coupled with the firms’ dominant market position, has led the DOJ to conclude that the original premises upon which the 1987 BRL was granted are no longer applicable.
Implications for the Proxy Advisory Industry and Corporate Governance
The withdrawal of the BRL, while not constituting a definitive finding of antitrust violation by ISS, is a strong indicator of impending intensified oversight. This heightened scrutiny is likely to ripple through the proxy advisory industry, potentially compelling firms like ISS and Glass Lewis to reassess their operational models, disclosure practices, and the scope of their advisory services.
Potential Impacts:
- Increased Transparency and Disclosure: State and federal regulators are likely to push for greater transparency regarding how proxy advisors develop their recommendations, the methodologies employed, and the potential conflicts of interest that may arise, particularly concerning ESG and DEI factors.
- Revised Service Offerings: Proxy advisors may need to bifurcate or significantly redefine their consulting services to avoid potential antitrust entanglements, particularly if these services are perceived to unduly influence corporate decision-making beyond shareholder voting.
- Shifting Shareholder Engagement: Companies may find themselves less beholden to the recommendations of proxy advisors, especially if the latter face stricter regulatory frameworks or if their influence is perceived to be diminished. This could lead to more direct engagement between companies and their shareholders on governance matters.
- Catalyst for Further Action: The DOJ’s move could embolden other regulatory bodies and private litigants to pursue actions against proxy advisors, potentially leading to a more litigious environment for the industry.
- Impact on ESG and DEI Debates: The intense focus on ESG and DEI in the context of proxy advisory firm influence may lead to a more robust debate about the role and appropriate implementation of these factors in corporate governance, potentially leading to more standardized and transparent approaches.
The DOJ’s decision to withdraw the 1987 BRL to ISS marks a significant turning point in the regulation of proxy advisory firms. It underscores a growing concern among policymakers about concentrated market power and the potential for undue influence in corporate governance. As this scrutiny intensifies, the proxy advisory industry faces a critical juncture, with potential shifts in its operational practices and its broader role in shaping the decisions of U.S. public companies. The coming months and years are likely to see continued regulatory action and legal challenges that will ultimately redefine the landscape of proxy advisory services.
This article is based on information from a Jones Day memorandum authored by Craig Waldman, Randi Lesnick, Ferrell Keel, Andrew Levine, and Mark Rasmussen. Jones Day’s insights series is subject to the disclaimers specified at https://www.jonesday.com/en/disclaimer.
