A federal judge blocked an Indiana law requiring new disclosures from proxy advisers, marking a third legal victory for Institutional Shareholder Services and Glass Lewis against restrictions supported by Republican lawmakers. The judge agreed the law amounted to prohibited "viewpoint discrimination."
The rulings safeguard the ability of proxy advisory firms to provide independent voting recommendations to investors, potentially influencing corporate governance and the adoption of ESG policies.
A federal judge has blocked an Indiana law that would have required proxy advisory firms to provide detailed financial analyses when recommending votes against company management. The ruling, issued late Friday, marks the third time in recent months that Institutional Shareholder Services (ISS) and Glass Lewis have successfully challenged state-level restrictions on their operations.
U.S. District Judge Matthew Brookman agreed with the proxy firms' arguments that the Indiana law, set to take effect July 1, amounted to prohibited "viewpoint discrimination" under the First Amendment. The law specifically imposed burdens on recommendations that disagreed with company management, while not applying similar requirements to analyses that aligned with management.
Republican lawmakers have increasingly supported efforts to curb the influence of proxy advisers, citing concerns that they unduly favor environmental, social, and governance (ESG) shareholder resolutions. Supporters of the Indiana law argued it was necessary to ensure advice focused on financial outcomes.
ISS and Glass Lewis have asserted that such laws infringe upon their free speech rights. Similar legal challenges in Texas and Kansas are ongoing, and ISS is also fighting similar suits in four other states. Florida has also sued ISS and Glass Lewis over consumer protection and antitrust allegations, which both firms deny.
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