Thirteen States Work to Silence Proxy Advisors

While the Executive Order on Proxy Advisors garners headlines and commentators speculate on whether we will see new legislation or SEC rulemaking, proxy advisor critics are quietly seeking to end run Congress and the SEC entirely. Their latest tactic: pushing bills through state legislatures to effectively create a chaotic, impractical patchwork of state regulation that makes providing objective proxy advice near impossible.  

The Texas federal court enjoined that state’s unprecedented proxy advisor bill before it went into effect last fall. Undeterred by this example, no fewer than thirteen states* are now considering measures to tilt proxy advice in management’s favor, often in ways that would apply far beyond their borders.

• In Indiana, a bill was introduced in January, passed the House in two weeks, quickly passed the Senate a few weeks later, and has already been signed into law by the state’s Governor, to be effective July 1, 2026.
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• Copycat bills are now pending in nine other states that would require proxy advisors to perform impractical “written financial analyses” before recommending against management or force advisors to make misleading disclosures to their clients, companies and the public at large. For example, a proxy advisor recommends a vote against a director who did not attend 50% of the meetings last year. For this single recommendation, the advisor would be required to include a lengthy, prescribed analysis that discusses, among other things, “the expected short term and long term financial benefits and costs to the [company]” or a written warning, which is also provided to the company, that the client is receiving proxy advice without a “written financial analysis.”  This requirement would apply to every issue on the proxy ballot with an against recommendation at every company covered, meaning thousands.
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• Several other states are advancing similar legislation – some geared toward advice to state pension plans and their asset managers – and some purporting to apply to any company regulated by the state. Among other things, these bills would prohibit proxy advice on executive compensation that “undermines the use of discretion by an independent compensation committee of the issuer’s board of directors.” In other words, shareholders may have a right to a say-on-pay, but it would be illegal for them to get advice to cast that vote against management. 

These bills are unworkable, conflict with federal law, and blatantly seek to suppress proxy advice that takes any perspective different from management’s. They also create unnecessary costs for proxy advisors and their clients, none of whom have asked for these additional analyses or need to be warned about what type of analysis they are receiving, but who will nonetheless foot the bill for the blizzard of mandated paperwork.  

Further raising the stakes, these bills provide for enforcement by litigation – inviting attorney generals, companies, and, in many cases, any company shareholder to sue over any proxy advice they take issue with.  

In our view, this is a highly unhealthy development for both the corporate community and our capital markets at large. Even apart from the coercive, corrupting effect on shareholder democracy, if any state can regulate what a New York proxy advisor says to a New York client about a New York company just because that company does business in the state – as a number of these bills purport to do – a precedent has been established for all sorts of creative uses of state law to affect corporate conduct far beyond that state’s borders.  

We plan to say more on this concerning development in the near future. In the meantime, below is a short statement we recently submitted in one state considering one of these bills.

On behalf of Glass Lewis, a leading proxy advisor, I write to express our significant concerns with SB 375. Simply stated, this novel bill would do nothing for Kansas investors. But it surely would impose unnecessary cost and operational burden on institutional investors and their proxy advisors. It also suffers from basic legal defects that have led to similar “anti-ESG” measures being struck down by the courts. We urge the Committee to postpone this bill for further consideration. 

Glass Lewis operates at the institutional investor level, serving sophisticated asset managers and pension funds. Our 95+% retention rate shows that our institutional investor clients understand and value the financial analysis Glass Lewis provides to them. None of these clients has expressed a need for any additional disclosures on this issue, let alone that they are the victim of “fraudulent or deceptive practices” as the bill misleadingly suggests. Moreover – and stated emphatically – Glass Lewis does not serve retail investors. Accordingly, an individual shareholder or citizen of Kansas would not have access to Glass Lewis’ proxy research and therefore would not even receive any of the notices mandated by the bill. 

Rather than genuinely serving the interests of Kansan investors, SB 375 is a copycat bill closely based on a model bill being promoted by a Washington, D.C.-area advocacy group as part of what has been called an “all out war on proxy advisors.” No state has yet passed such a bill. Similar legislation in Texas last year has been preliminarily enjoined by a federal court. The State of Missouri was forced to cover the other side’s legal fees after its novel “anti-ESG” bill was found to be preempted by federal securities laws. 

The bill being pushed on Kansas operates through a unique and impractical definition of “financial analysis.” Glass Lewis research reports often consist of 50 or more pages of financial analysis, including tables of quantitative information on the company’s performance, executive compensation and other financial matters. Many governance issues, however – for example, recommending against the reelection of a director who failed to attend most Board meetings or expecting audit committee members to be financial experts – do not lend themselves to a quantified cost/benefit analysis, even though they are widely considered critical risk mitigation measures. Because of the vague and unprecedented way the bill defines “financial analysis,” proxy advisors may be forced to misleadingly disclose they had not performed financial analysis in these circumstances, creating the misimpression their advice was not rigorous and motivated by their clients’ focus on investment returns. This, in turn, would create confusion and potential legal risk for our clients, some of whom in fact invest on behalf of Kansans. 

We are also troubled by a gratuitous and misleading reference to our firm in the bill’s findings. As noted above, Glass Lewis routinely does sophisticated financial analysis on relevant issues in its research reports. SB 375’s findings, however – which again were lifted verbatim from the activist group’s model bill – purports to quote Glass Lewis’ Chief Operating Officer as saying that Glass Lewis “does not conduct a written financial analysis before recommending votes on shareholder proposals and that other proxy advisors also do not do so.” 

This is highly misleading, at best. Glass Lewis research reports contain extensive, written, sophisticated quantitative and qualitative analysis in support of our benchmark policy recommendations. We are proud of the quality of our research and welcome comparison of it to any other participant in the proxy voting system. As can be clearly seen from its context (shown below), the statement in question was merely making the point that the relevant provision in the Texas bill, which has now been enjoined by the Texas federal courts, contained a novel and impractical definition of “written economic analysis” with unnecessarily prescriptive elements that go beyond the type of financial analysis we do. (Similar to Kansas’ SB 375, as noted above.) As the declaration states, no market participant – including the Boards of Directors of the largest corporations in this country – regularly engages in this sort of “written economic analysis” when making proxy voting recommendations to shareholders because it is impractical to do so. While the sort of sharp-elbowed spin reflected in the finding may be the norm for some political advocacy groups, it has no place in a state’s laws. 

Again, we urge the Committee to postpone this bill for further consideration. Alternatively, if the Committee disagrees with the above, SB 375 should be amended to apply to anyone soliciting a proxy vote. Unlike proxy advisors, proxy solicitors often have a vested interest in a proxy vote and regularly contact individual Kansan investors – even on their home or cell phone at times – to try to sway their vote. If SB 375 would provide proxy advisors’ sophisticated clients with valuable new information, surely individual Kansans are entitled to the same disclosures from entities seeking to obtain their vote. 

Glass Lewis appreciates the opportunity to provide this testimony to the Committee. We would be pleased to meet with you to discuss our work or SB 375 at any time.

Excerpt of SB 375: 

Sec. 2. The legislature of the state of Kansas finds [CG10] [GS11] the following: . . .(f) the chief operating officer of Glass Lewis, a major proxy advisor, stated under penalty of perjury that Glass Lewis does not conduct a written financial analysis before recommending votes on shareholder proposals and that other proxy advisors also do not do so. Proxy advisors, however, have advertised that the purpose of their recommendations is maximizing, increasing or protecting shareholder value 

Declaration of Glass Lewis Chief Operating Officer in Glass Lewis v. Paxton, Case 1:25-cv-01153 (W.D. Tex. 2025): 

The “written economic analyses” under Section 101(a)(2)(B) require extensive detail and would force Glass Lewis to undertake substantial economic analyses, in addition to its existing voting recommendation analysis. To my knowledge, no proxy advisor, board of directors, or other market participant engages in the sort of economic analysis called for by S.B. 2337 today. That analysis would entail significant additional cost for Glass Lewis, above and beyond the hundreds of thousands of dollars in annual compliance costs.