This is the first of a four-part series from Prospr Aligned’s head of corporate engagement and proxy voting expert, Jerry Bowyer.
Every year, Institutional Shareholder Services asks investors and other market participants to respond to its annual benchmark policy survey. That may sound like an obscure exercise. It is not.
Proxy advisory firms such as ISS and Glass Lewis are among the most influential voices in corporate America that most Americans have never heard of. They do not generally own the shares. They do not bear the economic consequences of the votes they recommend. Yet their benchmark policies influence how major institutions vote on director elections, executive compensation, shareholder proposals, climate policy, DEI programs, political spending, and other issues across thousands of public companies.
In plain English, proxy advisors tell institutional investors how to vote. Many investors do not follow them blindly, but enough votes are influenced by their recommendations that their views can shift outcomes, shape board behavior, and affect the governance climate inside public companies. They sit between the actual owners of capital and the companies owned by that capital, wielding enormous influence with surprisingly little public visibility.
That is why their annual policy surveys matter.
The most revealing feature of this year’s ISS Benchmark Survey may not be what it asks, but what it omits. The survey spends considerable time asking about climate-related disclosure, sustainability reporting, nature-related frameworks, and whether directors should be held accountable when companies reduce environmental disclosures. It asks how shareholders should respond when companies pull back from climate reporting. It asks whether companies with nature-related risks should report under emerging frameworks such as TNFD or SBTN. It asks how boards should respond to concerns raised in connection with sustainability-related assurance.
What it does not appear to ask is just as important.
The survey does not seriously engage the rise of shareholder proposals seeking to challenge, reform, limit, or roll back ESG and DEI initiatives. That is not a random omission. It is a structural bias.
In recent years, investors have filed proposals asking companies to report on the risks created by DEI programs, examine potential viewpoint discrimination, assess religious-liberty risks, review debanking or denial-of-service concerns, disclose the risks of politicized charitable giving, address employee speech policies, and reconsider climate or sustainability commitments that may not be connected to shareholder value. These proposals do not all use the same language, and they do not all come from the same proponent. But they reflect a clear and growing governance concern: many investors believe ESG and DEI programs themselves can create legal, reputational, operational, and fiduciary risks.
That perspective is almost entirely outside the frame of the ISS survey.
The survey asks whether companies should be penalized for reducing climate disclosures. It does not ask whether some climate disclosures should be reduced.
It asks whether companies should use emerging environmental frameworks. It does not ask whether those frameworks have become too speculative, too ideological, or too disconnected from shareholder value.
It asks whether directors should be held accountable for pulling back from ESG-style disclosure. It does not ask whether directors should be held accountable for adopting ESG or DEI initiatives that alienate customers, expose the company to litigation, or subordinate financial returns to political goals.
This is not merely a blind spot. A blind spot might be accidental. This looks like a one-directional policy framework. The survey treats ESG retreat as a governance problem, but does not seriously consider the possibility that ESG entrenchment may be the governance problem.
That matters because ISS benchmark policies are not academic commentary. They can become voting recommendations.
This is especially troubling because proxy advisory firms already have a long history of favoring ESG and DEI-oriented proposals, while giving little or no meaningful support to proposals that push in the opposite direction. Even as the broader market has grown more skeptical of ESG, and even as companies have begun retreating from some DEI and net-zero commitments, the proxy advisory world (headquartered in the DC exurbs) has remained far more insulated from that shift than ordinary investors, employees, customers, and voters.
I say this not as an outside observer. Since 2019, I have been in extensive discussions with the major proxy advisory firms and related participants in the proxy voting system. I have repeatedly challenged their assumptions, their policy frameworks, and their treatment of ESG and DEI-related proposals. Those conversations have been useful in understanding the system. They have not persuaded me that the system is balanced.
To the contrary, it has become increasingly clear to me that much of the proxy advisory world operates inside a narrow bubble of opinion. Many of the people shaping these policies appear to have very little understanding of the half of the country that disagrees with them on ESG, DEI, climate policy, political neutrality, religious liberty, viewpoint discrimination, and related questions. They may know that opposition exists. But they do not appear to understand it as a serious fiduciary, legal, cultural, or governance perspective.
That is the real problem with the ISS survey.
It does not simply ask neutral questions about a changing market. It asks questions as though the main governance issue is how to preserve or enforce ESG-related expectations at a time when many companies and investors are questioning them. It gives respondents repeated opportunities to support continued disclosure, continued accountability, and continued sustainability frameworks. But it gives little comparable space to the investor view that some ESG and DEI initiatives should be reconsidered, narrowed, or reversed.
A survey can reveal bias through the questions it asks. It can also reveal bias through the questions it refuses to ask.
For fiduciaries, this should be a warning. The rise of anti-ESG and anti-DEI shareholder proposals is one of the most important developments in corporate governance. It reflects a growing concern that corporations have been pulled into political and ideological commitments that may not serve shareholders. Any benchmark policy process that largely ignores that development is not merely incomplete. It is structurally biased.
Investors should not outsource their judgment to institutions that do not bear the consequences of the votes they recommend, do not speak transparently enough to the public, and do not appear to understand the full range of investor views now present in the market.
Proxy advisors may be influential. But they are not owners. They are not fiduciaries for every investor whose votes they influence. And they should not be allowed to define the boundaries of acceptable corporate governance debate.