Institutional Shareholder Services
{{Short description|Proxy advisory firm}}
{{Infobox company
| name = Institutional Shareholder Services Inc.
| logo =File:Institutional Shareholder Services logo.png
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| type = Private
| industry = Investment Management
| founded = {{Start date and age|1985}}
| founder =
| hq_location = Rockville, Maryland, United States
| area_served =
| key_people =Gary Retelny (CEO)
| products =
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| services = Proxy advisory
SRI advisory
Corporate governance
Market intelligence
| owner =
| subsid = ISS-Ethix
FWW Fund Services{{cite web |url=https://www.fww.de/ |title=Home |website=fww.de}}
| website = {{url|issgovernance.com}}
}}
Institutional Shareholder Services Inc. (ISS) is an American 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.{{cite journal | url=https://doi.org/10.1016/j.jfineco.2024.103810 | doi=10.1016/j.jfineco.2024.103810 | title=The proxy advisory industry: Influencing and being influenced | date=2024 | last1=Shu | first1=Chong | journal=Journal of Financial Economics | volume=154 }}
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.{{cite journal|date=2015|title=Shareholder Litigation Without Class Actions|url=https://scholarship.law.bu.edu/cgi/viewcontent.cgi?article=1035&context=faculty_scholarship|journal=Arizona Law Review|volume=57|issue=1|page=213|access-date=18 November 2019}}
History
ISS was founded in 1985.{{cite news |last1=Hoffman |first1=Liz |title=Vestar Buys Institutional Shareholder Services From MSCI for $364M |url=https://www.wsj.com/articles/DJFLBO0020140318ea3igmswe |access-date=13 January 2024 |work=Wall Street Journal |date=18 March 2014}}{{cite news |last1=StreetJournal |first1=Monica LangleyStaff Reporter of The Wall |title=ISS Rates Firms -- and Sells Roadmap to Boosting Score |url=https://www.wsj.com/articles/SB105485006531971100 |access-date=13 January 2024 |work=Wall Street Journal |date=6 June 2003}}
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.{{cite news|last1=Chmielewski|first1=Dawn C.|title=Proxy advisor criticizes Disney CEO Iger's new chairman title|url=https://www.latimes.com/entertainment/la-xpm-2012-mar-02-la-fi-ct-disney-iss-20120302-story.html|access-date=February 18, 2016|work=Los Angeles Times|date=March 2, 2012}} 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.{{cite news |url=https://www.washingtonpost.com/business/forest-labs-shareholders-elect-1-of-4-board-nominees-from-investor-carl-icahn/2012/08/15/02253ce0-e6f1-11e1-9739-eef99c5fb285_story.html |title=Forest Labs shareholders elect 1 of 4 board nominees from investor Carl Icahn |date=August 15, 2012}}{{dead link|date=June 2021|bot=medic}}{{cbignore|bot=medic}}
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.{{cite web|url=https://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171574952|title=SEC Charges Institutional Shareholder Services in Breach of Clients' Confidential Proxy Voting Information |publisher=SEC |date=2013-05-23}} 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.{{citation|url=https://www.nytimes.com/roomfordebate/2014/09/14/pocketing-profits-or-reinvesting-them/to-increase-investment-change-the-definition-of-shareholder-value |title=To Increase Investment, Change the Definition of 'Shareholder Value' |author=Lynn Stout |date=September 14, 2014}} It was owned by MSCI until April 30, 2014 when it was purchased by Vestar Capital Partners.{{cite web |url=http://www.issgovernance.com/vestar-capital-partners-completes-acquisition-of-institutional-shareholder-services/ |title=Vestar Capital Partners Completes Acquisition of Institutional Shareholder Services |date=April 30, 2014 |publisher=ISS press release}}
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.{{cite news|last1=Brown|first1=Adam|title=ISS acquires Scandinavia-based SRI adviser Ethix|url=http://www.irmagazine.com/articles/proxy-voting-annual-meetings/20988/iss-acquires-scandinavia-based-sri-adviser-ethix/|access-date=February 18, 2016|work=IR Magazine|publisher=Cross Border Ltd.|date=September 15, 2015}}
In 2017, ownership of ISS switched to Genstar Capital.{{cite web |url=https://www.issgovernance.com/genstar-capital-partnership-management-announces-acquisition-institutional-shareholder-services-vestar-capital-partners/ |title=Genstar Capital, in Partnership with Management, Announces Acquisition of Institutional Shareholder Services from Vestar Capital Partners |date=September 7, 2017 |publisher=ISS press release}} In March 2018, ISS also acquired the German ESG rating agency oekom research AG.{{cite web |url=https://www.issgovernance.com/oekom-research-ag-join-institutional-shareholder-services/ |title=oekom research AG to Join Institutional Shareholder Services |date=March 15, 2018 |publisher=ISS press release}} In November 2020, Deutsche Börse announced the acquisition of a majority in ISS-shares for about 1.5 billion Euro.{{cite web |url=https://www.handelsblatt.com/finanzen/maerkte/marktberichte/uebernahme-in-den-usa-deutsche-boerse-kauft-stimmrechtsberater-iss-fuer-1-5-milliarden-euro/26633864.html?ticket=ST-178836-lOTMHzGzCRxHH1o5WMzb-ap6 |title=Deutsche Börse kauft Stimmrechtsberater ISS für 1,5 Milliarden Euro |date=November 17, 2020 |publisher=Handelsblatt}}
= Acquisitions =
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.{{Cite web |title=ISS acquires Scandinavia-based SRI adviser Ethix |url=https://www.irmagazine.com/esg/iss-acquires-scandinavia-based-sri-adviser-ethix |access-date=2022-10-19 |website=www.irmagazine.com |language=en}}
In January 2017, ISS acquired IW Financial, a U.S.-based firm offering environmental, social, and governance (ESG) research, consulting, and portfolio management solutions.{{Cite web |last=shannonroberts |date=2017-01-05 |title=ISS Announces Acquisition of IW Financial |url=https://www.vestarcapital.com/iss-announces-acquisition-of-iw-financial/ |access-date=2022-10-19 |website=Vestar Capital Partners |language=en-US}}
In June 2017, ISS acquired Climate Neutral Investments (CNI), the Investment Climate Data division of the South Pole Group.{{Cite web |last=Finance |first=Next |title=News - ISS Announces Acquisition of Investment Climate Data Advisory Division of South Pole Group |url=https://www.next-finance.net/ISS-Announces-Acquisition-of |access-date=2022-10-19 |website=Next Finance |language=en}}
In February 2018, ISS acquired EVA Dimensions, a provider of cash-flow-based analysis of corporate performance.{{Cite web |last=Bragg |first=Sanford |date=2018-02-13 |title=ISS Acquires EVA Dimensions After ESG Success • Integrity Research |url=https://www.integrity-research.com/iss-acquires-eva-dimensions-esg-success/ |access-date=2022-10-19 |website=Integrity Research |language=en-US}}
In March 2018, ISS acquired oekom AG, a provider of environmental, social, and governance (ESG) ratings and data.{{Cite web |title=oekom research to Join Institutional Shareholder Services |url=https://www.csrwire.com/press_releases/40853-oekom-research-to-join-institutional-shareholder-services- |access-date=2022-10-19 |website=www.csrwire.com |language=en}}
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.{{Cite web |last=Mitchell |first=James |date=2019-02-18 |title=Proxy giant ISS bolsters ESG muscle with Aussie acquisition |url=https://www.investordaily.com.au/mergers-acquisitions/44446-proxy-giant-iss-bolsters-esg-muscle-with-aussie-acquisition |access-date=2022-10-19 |website=www.investordaily.com.au |language=en-gb}}
In October 2020, ISS acquired FICO Cyber Risk Score Business, which helps organizations in their efforts to measure, manage and reduce cyber risk.{{Cite web |last=MarketScreener |title=Fair Isaac : FICO to Sell Cyber Risk Scoring Business to Institutional Shareholder Services {{!}} MarketScreener |url=https://www.marketscreener.com/quote/stock/FAIR-ISAAC-CORPORATION-5523345/news/Fair-Isaac-FICO-to-Sell-Cyber-Risk-Scoring-Business-to-Institutional-Shareholder-Services-31585697/ |access-date=2022-10-19 |website=www.marketscreener.com |language=en}}
In February 2021, ISS acquired ACRe Data, a provider of ESG Scoring for the U.S. Municipal marketplace.{{Cite web |last=Segal |first=Mark |date=2021-02-01 |title=ISS Acquires Muni Bond ESG Scoring Provider ACRe Data |url=https://www.esgtoday.com/iss-acquires-muni-bond-esg-scoring-provider-acre-data/ |access-date=2022-10-19 |website=ESG Today |language=en-US}}