Tuesday, May 22, 2007
Who owns the proxy advisory firms, and does it affect the quality of their services? A Wall St. Journal article today explores these questions and looks at the two leaders, Glass Lewis & Co. and Institutional Shareholder Services. Glass Lewis is wholly owned by Shanghahi's Xinhua Finance Ltd., rising concerns about the influence of the Chinese government. Two employees -- Lynn Turner (former SEC chief accountant) and Jonathan Weil (former WSJ reporter)-- recently resigned, citing concerns with the parent company's conduct. ISS, in turn, is owned by risk management firm RiskMetrics Group, that purportedly is considering an IPO. The longstanding concern about ISS is the conflict of interest between its proxy advisory services, where it advises shareholders how to vote on corporate governance matters, and its consulting services, where it advises companies on how to improve their corporate governance policies. The conflict could be exacerbated if ISS goes public. See WSJ, Proxy-Advisory Firms Encounter Concerns on Owners' Influence.