Proxy Governance Goes after ISS in Proxy War of Proxy Services

The cold war among proxy service companies has been getting a lot hotter lately.

Proxy Governance, a proxy service firm based in Vienna, Va., has gone on the offensive by pushing for a "code of ethics" among its group which includes Glass Lewis & Company and Egan Jones.
And, it has directly gone after formidable competitor RiskMetrics/ISS by calling for a probe by the U.S. Securities & Exchange Commission into RiskMetrics/ISS for its "monopolistic power" the firm wields that gives it an "SEC-like rule-making authority over corporate governance practices without appropriate checks and balances."

Risk service companies regularly track annual meetings and weigh in on board candidates and shareholder resolutions. Risk Metrics, which recently bought Institutional Shareholder Services (ISS) of Rockville, Md., has come under repeated attack for allegedly selling consulting services to the firms that it rates. Last month, Meagan Thompson-Mann, an academic and visiting fellow at the Milstein Center for Corporate Governance and Performance at Yale University, proposed a code of ethics for the proxy service industry. Indeed, the offensive by Proxy Governance appears to be linked to her report, "Voting Integrity: Practices for Investors and the Proxy Industry," that was released in June.

Also in June, Proxy Governance underwent a change in management with the arrival of Michael J. Ryan, Jr. who is president and chief operating officer. Ryan has a long experience with corporate governance issues and was once general counsel with the American Stock Exchange, worked for Price Waterhouse and has been a lawyer with the SEC. Most recently, he was executive director of the Center for Capital Markets Competitiveness operated by the U.S. Chamber of Commerce. The Center served as a think tank to achieve the Chamber's goals of dampening the impact of regulations, notably the Sarbanes-Oxley Act.
Now it appears that Ryan has ISS in his sights. Proxy Governance says one of its goals is to adopt the ethics code to eliminate conflicts of interest specifically involving proxy service firms from selling consulting services to the companies it rates.

Stay tuned. Looks like we have a brand new proxy (services) fight.