For all the talk of a retreat from ESG and stakeholder capitalism, there is still a long way to go until they are pushed back into the position where they belong.

Where’s that? Well, in the case of the former, it’s as an investment option that has been actively chosen by the underlying investors in a fund, ETF, or other investment vehicle. As for stakeholder capitalism, that should only be adopted by companies that have, with shareholder approval, specifically renounced shareholder primacy.

The retreat from ESG, stakeholder capitalism, and DEI (another member of this unlovely family) is clearly underway, at least on this side of the Atlantic, but there is still a long way to go. One reason for that is the way that these ideas have insinuated themselves into so many institutions, including proxy advisory firms. These are firms paid by asset managers for their advice on how to vote their shares, something that a money manager with hundreds or more companies in their portfolios will typically not have the time to do.

In the U.S., the market for proxy advisory services has been dominated by just two firms, ISS and Glass Lewis, which have become well known for their progressive bias.

For example, via the Governance Beat (March 4):

For Russell 3000 companies, Glass Lewis generally recommends voting against the nominating committee chair of a board that is not at least 30% gender diverse or all nominating committee members of a board with no gender diverse directors. For companies outside of the Russell 3000 index, Glass Lewis will recommend voting against the nominating committee chair if there are no gender diverse directors.
For Russell 1000 companies, Glass Lewis generally recommends voting against the nominating committee chair of a board with fewer than one director from an underrepresented community.”

Not much changed there.

Interestingly, we’ve just had four years of an FTC led by Lina Khan, a progressive (with a fan base among big government conservatives such as Senator Josh Hawley), who was very concerned about “market concentration” in the U.S. That’s not something as such that particularly bothers me, but it is interesting that the extraordinary concentration in the market for proxy advisory services (a specialized, but because of the companies’ influence, very important market) never appeared to have attracted Khan’s attention. I’m sure that, if this was the case, their political leanings had nothing to do with it.

But even if ISS and Glass Lewis have escaped the wrath of Khan, they have not dodged the wrath of Jamie Dimon, CEO of JP Morgan.

The Daily Telegraph:

The chief executive of JP Morgan has branded two of the world’s top shareholder proxy advisers “incompetent” amid a growing backlash over their support for diversity policies.
Jamie Dimon said Glass Lewis and Institutional Shareholder Services (ISS) should be “gone and dead and done with”, as he also launched an attack on those who pay for their services. . . .
Mr Dimon said Glass Lewis and ISS had contributed to a burdensome regulatory environment that is “driving companies out of the public market”.
It comes amid a growing backlash against the powerful advisory firms over their positions on corporate diversity, equity and inclusion (DEI) policies.

The Telegraph notes that together ISS and Glass Lewis advise 90 percent of the world’s largest pension funds and asset managers on how to cast their shareholder votes.