The U.S. Justice Department’s retraction of a decades-old business review letter signals a shift toward potential antitrust enforcement against proxy advisers.

When the Justice Department announced the change on Aug. 5, it said the business review letter’s premise is stale because Institutional Shareholder Services Inc., a top proxy adviser, provides corporate consulting services, which the original 1987 agreement explicitly excluded. This means that the “foreign-owned” proxy advisory firm’s current business model now conflicts with the language in the letter, the Justice Department’s statement said. “Moreover, the concentration of market power in the proxy advisory market raises significant competition concerns,” it added.

ISS and rival Glass, Lewis & Co. LLC control more than 90% of the market for proxy advisory services.

“This is simply a harassment technique. There is no way [an antitrust case] could possibly succeed,” argued Nell Minow, chair of ValueEdge Advisors LLC. Minow left the Justice Department’s antitrust division in 1986 to join ISS as general counsel and later served as the proxy adviser’s president.

A case against ISS would lack the fundamental elements of a legitimate antitrust investigation, Minow continued, noting the absence of allegations regarding price collusion or barriers to entry. Further, an attempt to dictate the contents of written analysis violates First Amendment protections, she added.

Minow and other activism experts said the proxy adviser operates with a firewall that separates its consulting services business from teams who prepare proxy advice on publicly traded companies.

Also, institutional investors already have the option to choose proxy advisers without consulting arms, like Glass Lewis, Minow pointed out.

ISS, in an emailed statement, said its two units — proxy advisory and ISS Corporate business — are physically separated and independently managed.

Breaking up would be hard to do

Nevertheless, the retraction of the business review letter suggests that the Justice Department could consider filing a lawsuit to seek to separate the proxy advice division from the consulting operation at ISS. However, a forced breakup of ISS is an unlikely outcome of a potential DOJ probe, an antitrust lawyer in Washington said, adding that such a drastic structural remedy lacks a clear justification in this specific antitrust case. Instead of seeking to dismantle the organization entirely, regulators would likely pursue injunctive relief aimed at prohibiting specific business conduct, he continued.

In a breakup, ISS’ consulting unit would likely struggle to survive, some activism experts said. It relies on access to the institutional side’s proprietary “black box” model for determining voting recommendations on corporate governance issues, particularly for say-on-pay and share authorizations, explained Chris Young, the founder and former head of the ISS special situations team. Also, even if the consulting unit was spun out and maintained a licensing agreement to access that data, it would still be viewed as a “related party,” meaning that the conflict-of-interest optics would likely persist, he added.

Young also questioned whether the proxy advice side could remain profitable on its own because the fees it charges for institutional research are “very low.” As the corporate consulting arm provides a “significant contribution” to ISS’ overall income, breaking the units up could mean “shutting down,” he added.

A forced ISS breakup would be a “nightmare” for proxy solicitors, who rely on a centralized nexus to manage shareholder votes, Bob Marese, president of MacKenzie Partners Inc., said. If ISS were dismantled, or saw its influence significantly curtailed, proxy solicitors would be forced to engage individually with dozens of institutions, many of which lack the bandwidth or resources to analyze complex proposals, potentially paralyzing the voting process, he said.

For companies, the outcome of such a breakup could also be unexpectedly detrimental. ISS and Glass Lewis recommend for management more than 95% of the time, Minow underscored. Marese, meanwhile, warned that companies clamoring for reduced proxy adviser power should be “careful what they wish for,” as the loss of a centralized roadmap could lead to a quorum failure. If a breakup were to lead to lower institutional participation, companies might struggle to meet a 50% plus one share participation threshold required to hold annual meetings, forcing them to amend charters or lobby states to lower requirements, he added.

Further, shareholders, particularly resource-constrained institutions, could undergo a behavioral shift. Without ISS guidance, these investors may default to voting against management on complex or confusing ballot initiatives, Marese explained. This default opposition could create a dangerous environment for corporate governance, where voting outcomes are driven by a lack of understanding rather than by informed analysis of the matter at hand, he continued.

Against this backdrop, activist investors might stand to gain the most. Adept at using the “what’s the harm?” argument to win board seats, they could exploit the confusion to gain support for their agendas, Marese said.

Why now?

According to Minow, antitrust chatter around proxy advisers is escalating now because several state-level attempts to curb proxy advisers have already been struck down on constitutional grounds.

The Justice Department’s withdrawal of the 1987 letter also aligns with President Trump’s December 2025 executive order targeting proxy advisers. The order accused the firms of using their “substantial power” to advance and prioritize diversity, equity and inclusion and ESG, and it directed the Securities and Exchange Commission, the Department of Labor and the Federal Trade Commission to investigate proxy advisers and to limit their influence.

To this end, the Labor Department is expected to release new rules that formalize classifying proxy advisers as fiduciaries under the Employee Retirement Income Security Act of 1974 “any day now,” an activism expert in Washington said.

Its forthcoming rules could expand Erisa’s reach on shareholder voting, potentially complicating activists’ attempts to enact change by swaying the massive voting blocs represented by institutions such as BlackRock Inc. (BLK) and T. Rowe Price Group Inc. (TROW).

In addition, legislative threats to proxy advisers persist. During a House Judiciary Subcommittee hearing on alleged “anticompetitive conduct” by ISS and Glass Lewis in June, U.S. Rep. Scott Fitzgerald, R-Wisc., called on competition authorities at the DOJ and the FTC to consider focusing their attention and resources on studying the effects of the “proxy [adviser] duopoly.”

A day earlier, Fitzgerald introduced legislation to prohibit proxy advisers from issuing voting recommendations if a direct, or indirect, conflict of interest is present.

In addition to legislative concerns, the rise of artificial intelligence also potentially poses a significant threat to proxy adviser business models, experts said.

In time, ISS’ proprietary “black box” compensation models could be reverse engineered by AI, Young said. This is potentially aided by the fact that proxy advisers are policy-based organizations that set out to operate within the parameters of their stated policies, he noted. These policies are shaped by institutional investor feedback gleaned through annual surveys, Young said, adding that he isn’t sure how often their compensation and share authorization policies are updated.  

In a January keynote address, Brian Daly, director of the SEC’s Division of Investment Management, suggested that institutional shareholders who determine that voting isn’t required by their clients shouldn’t vote and that fund managers who believe that they have a fiduciary duty to vote proxies, as most do, should consider employing AI as an alternative to following proxy adviser recommendations.

Clarifying in statute that institutional investors don’t have to vote on shareholder proposals, as a way to limit the power of proxy advisers and the big three index fund families, was also floated as an idea during a House Financial Services Committee hearing on “Proxy Power and Proposal Abuse” last September.

Glass Lewis declined comment, and the Justice Department didn’t respond to a request for comment.

Editor’s note: The original version of this article was published Aug. 21, 2026, on The Deal’s premium subscription website. For access, log in to TheDeal.com or use the form below to request a demo.