The Proxy Advisers Strike Back

ISS and Glass Lewis join New York City in trying to stop Exxon from moving to Texas

WSJ editorial. Excerpts:

"Activists with little stake in companies have abused the shareholder proxy process to drive their environmental, social and governance (ESG) political agenda. This includes resolutions requiring CO2 emission cuts and workforce diversity audits. Plaintiff firms and government pension funds are using shareholder lawsuits to shake down companies.

It’s often less expensive for companies to settle lawsuits than defend against them. One reason is courts in states like Delaware and New Jersey have become unpredictable. Recall how a Delaware judge in 2024 invalidated Tesla CEO Elon Musk’s pay package—which shareholders had twice approved—on the dubious rationale that it violated the state’s “fairness” standard. 

All of this explains why Exxon is joining a parade of companies, including Tesla, Space X, Coinbase and Dillard’s, that have moved their legal homes to Texas."

"Glass Lewis and ISS, which control 90% of the proxy advisory market, also fear their power over companies will wane if activists face a higher burden to bring ESG resolutions."

"Limiting access to the proxy ballot for political activists who don’t have a stake in a company’s long-term success is in the interest of shareholders."

"“substantial portion of the S&P 500 including the majority of Delaware incorporated issuers, maintain exclusive-forum provisions designating a single court for internal affairs litigation.”"