Press Releases

Huizenga Delivers Remarks at Hearing to Conduct Oversight of the Proxy Advisory Industry

Washington, July 13, 2023 -

Today, the House Financial Services Subcommittee on Oversight and Investigations, led by Chairman Bill Huizenga (MI-04), is holding a hearing entitled “Oversight of the Proxy Advisory Industry.”
Watch Chairman Huizenga’s opening remarks here.
Read Chairman Huizenga’s opening remarks as prepared for delivery:

“Mr. Shostal, Mr. Friedman–I appreciate you appearing before the Oversight and Investigations Subcommittee this afternoon. I believe this is the first time your firms have testified before our committee, so congratulations!
“I’d like to start by addressing an argument made yesterday by my friends on the other side of the aisle–that Republicans are interfering with free market principles and that any attack on ESG is a threat to capitalism. That could not be further from the truth. We are holding these hearing to in fact, defend capitalism and keep social policies out of the boardroom. Social policies should be debated in Congress and in state capitals, not arbitrarily decided by third parties.
“Now to the topic at hand. Currently, proxy advisory firms play an outsized role in our capital markets. 
“However, as the Biden Administration continues to pursue ESG-related policies through regulation, often bypassing Congress, their influence has grown.
“Recent data suggests that on average, a recommendation from ISS or Glass Lewis can swing a shareholder proposal vote by as much as 30 percent.
“Today, you will hear from our witnesses that the proxy advisory industry provides sound, independent recommendations to investors in order to maximize shareholder value.
“In reality, proxy advisor firms have hijacked the shareholder process, becoming the de facto standard setters for corporate governance policies in the U.S.
“But questions remain.
“Today, the Committee will seek to understand what metrics proxy advisor firms use to measure the impact ‘environmental, social, and governance’ (ESG) policies have on maximizing long-term value.
“In addition, we will explore whether the proxy advisory firms have sufficient oversight and transparency, giving shareholders confidence that the recommendations being provided are free from political influence.
“Finally, the subcommittee hopes to identify the factors used by the proxy advisory firms when making voting recommendations.
“Mr. Shostal, Mr. Friedman, in the past, your firms have declined to disclose your historical data, and how you formulate your voting policies and recommendations. Transparency ensures accuracy and accountability, which is the only way your firms can promote a fair and reliable proxy process.
“And of course, under the chairmanship of Gary Gensler, the SEC has injected themselves into the process–which should be a surprise to no one.
“Recent actions taken by the Commission have made it nearly impossible for companies to defend themselves against ESG proposals–which have grown to over 60% of all proposals in 2023.
“The simple truth is this.
“ISS and Glass Lewis bear none of the consequences their recommendations have and operate without sufficient transparency. Ultimately, both ISS and Glass Lewis don’t answer to shareholders or have a fiduciary responsibility to maximize returns on their investments.
“Prioritizing political policies over sound economic analysis undermines the fundamental purpose of the proxy voting system.
“I look forward to hearing from all our witnesses today and yield back the balance of my time.”


Print version of this document