Waukesha Times

Wisconsin State Representative Scott Fitzgerald has introduced the Stopping Proxy Advisor Racketeering Act, which aims to address the influence of proxy advisory firms. Fitzgerald said that these firms have "outsized influence" and operate "in the shadows."

"Proxy advisory firms have outsized influence over corporate governance but operate in the shadows," said U.S. Rep. Scott Fitzgerald (R-Wi). "My bill will rein in these unaccountable firms and restore fairness and transparency for American investors."

According to Fitzgerald, the proposed legislation seeks to amend the Securities Exchange Act of 1934 by restricting proxy advisory firms from issuing proxy voting advice when specific conflicts of interest are present. These conflicts include providing consulting services to registrants, altering recommendations based on a registrant's subscription status, issuing advice while offering stewardship services to interested parties, or holding membership in an organization supporting a related shareholder proposal. Violations would result in administrative civil penalties enforced by the Securities and Exchange Commission (SEC), as noted in a press release.

The bill defines a "proxy advisory firm" as any entity marketing and selling proxy voting advice separately from investment advice. It also defines "consulting services" as offering non-public information or guidance on corporate governance and other policies linked to shareholder votes. The SEC would be authorized to conduct proceedings, determine violations, and impose penalties based on existing enforcement standards.

The legislation highlights the concentration of the proxy advisory market, noting that two firms—Institutional Shareholder Services (ISS) and Glass Lewis—dominate 97% of it. These firms provide recommendations influencing shareholder decisions involving trillions of dollars in assets. The bill seeks to regulate when and how these firms may issue advice if any direct or indirect conflict exists and provides criteria under which advice must be withheld.

Fitzgerald represents Wisconsin’s Fifth Congressional District in the U.S. House of Representatives. He previously served in the Wisconsin State Senate from 1995 to 2021 in roles such as Majority Leader and Minority Leader. He graduated from Hustisford High School and earned a Bachelor of Science degree from the University of Wisconsin-Oshkosh. Fitzgerald also served in the U.S. Army Reserve for 27 years before retiring as a Lieutenant Colonel.