Institutional Shareholder Services
| Company type | Private |
|---|---|
| Industry | Financial services, Proxy advisory |
| Founded | 1985 |
| Headquarters | Maryland , United States |
Area served | Global |
| Products | Proxy advisory, ESG research and ratings, Corporate governance consulting |
| Owner | Deutsche Börse (majority stake since 2020) |
| Parent | Deutsche Börse |
Institutional Shareholder Services Inc. (ISS) is a U.S.-based proxy advisor organization that supports hedge funds, mutual funds, and institutional investors by offering guidance and frequently casting votes on their behalf regarding shareholder issues. As the dominant player in this sector, ISS commanded a 48% share of the market in 2021, surpassing competitor Glass Lewis, which held 42%.
ISS has attracted scrutiny for its stance opposing fee-shifting clauses in securities fraud lawsuits, leading to demands for increased regulatory supervision.
History
Established in 1985, ISS has played a significant role in shaping key corporate governance outcomes. For instance, following Disney’s decision in 2011 to merge the CEO and chairman roles and raise CEO compensation, ISS advised shareholders to oppose four members of Disney’s Nominating and Governance Committee at the company’s 2012 annual meeting. Additionally, ISS supported two board nominees put forward by investor Carl Icahn during Forest Laboratories’ 2012 proxy battle.
In 2013, ISS settled with the SEC by paying a $300,000 penalty and agreeing to hire a compliance consultant after failing to safeguard clients’ confidential proxy voting information. The firm’s impact on CEO appointments was notably discussed in a 2014 opinion article in The New York Times authored by Cornell law professor Lynn Stout. Previously under MSCI ownership, ISS was acquired by Vestar Capital Partners in 2014.
To strengthen its presence in Europe and expand its environmental, social, and governance (ESG) advisory offerings, ISS purchased Ethix SRI Advisors in 2015, subsequently rebranding it as ISS-Ethix to spearhead sustainable investment efforts. Ownership changed hands to Genstar Capital in 2017, followed by the acquisition of German ESG rating firm oekom research AG in 2018. In November 2020, Deutsche Börse secured a majority ownership stake in ISS for roughly €1.5 billion.
Acquisitions
In September 2015, ISS acquired Ethix SRI Advisors, a firm specializing in sustainable and responsible investment (SRI) research and solutions such as corporate engagement and performance tracking.
January 2017 saw ISS purchase IW Financial, a U.S.-based provider of environmental, social, and governance (ESG) research, advisory services, and portfolio management tools.
In June 2017, ISS expanded further by acquiring Climate Neutral Investments (CNI), the Investment Climate Data unit of the South Pole Group.
ISS continued its acquisitions with EVA Dimensions in February 2018, a company focused on cash-flow-based corporate performance metrics.
oekom AG, an ESG ratings and data provider headquartered in Germany, was added to ISS’s portfolio in March 2018.
In February 2019, ISS acquired CAER, an Australian research firm that assists institutional investors with ESG policy monitoring and disclosure evaluation within portfolio companies.
October 2020 marked ISS’s acquisition of the FICO Cyber Risk Score Business to enhance its cyber risk measurement and management capabilities.
Finally, in February 2021, ISS acquired ACRe Data, which offers ESG scoring services specifically for the U.S. municipal bond market.