Nebraska and a coalition of state attorneys general have sued proxy advisory firm Institutional Shareholder Services, accusing it and its rival of pushing climate and DEI agendas into corporate boardrooms while masking advocacy as neutral advice; the case highlights how two foreign-owned firms control nearly the entire proxy advisory market and raises questions about undisclosed coordination, potential conflicts of interest, and the stewardship of everyday investors’ retirement funds.
Nebraska Attorney General Michael Hilgers filed a lawsuit alleging Institutional Shareholder Services, or ISS, steered shareholder votes toward climate and diversity outcomes while presenting its work as objective guidance to investors. The complaint says ISS coordinated recommendations with activist groups and failed to test whether those recommendations actually benefited the people whose money was at stake. Attorneys general from at least 17 states have joined or expressed support for the action, arguing this is about accountability and protecting investors.
Proxy advisory firms like ISS and Glass Lewis tell large investors how to vote in corporate elections, and in practical terms they shape outcomes across thousands of boards. Together the two firms are said to control roughly 97 percent of that market. That concentration, paired with foreign ownership in ISS’s case, has now become a flashpoint for states arguing that outside actors were exerting political influence over American companies without transparency.
The lawsuit points to internal emails and staff concerns to make the case that ISS’s ESG work was shaky and sometimes ideological. One employee wrote, “I wish we had a better process (and one that didn’t rely so heavily on the opinions of non-experts, frankly).” Another blunt assessment quoted in the complaint read, “ISS ESG data probably isn’t accurate.” Those internal admissions feed the broader claim that the firm misled clients about the rigor and neutrality of its advice.
Nebraska highlights specific examples to show the real-world consequences of proxy recommendations. The complaint notes that in 2021 ISS advised investors to pause on reelecting Warren Buffett to his own board over climate concerns, despite Berkshire Hathaway’s strong stock performance in prior years. The suit alleges ISS did not analyze possible financial effects of forcing changes at the company before issuing that recommendation, and an internal message acknowledged the move was part of “the other climate risk-driven recs that we’ve made this year.”
“ISS sold Nebraska investors on the promise of objective, independent research,” Hilgers said. “What they were actually getting was advocacy — coordinated with ESG activist organizations, untested against any financial standard, and driven by an ideological agenda that ISS never disclosed. You cannot promise one thing and deliver another in Nebraska.”
States beyond Nebraska have filed their own suits or coordinated legal action, including Iowa, Texas, West Virginia, and Florida. Florida Attorney General James Uthmeier described these firms as “unaccountable foreign-owned private corporations” manipulating shareholder votes behind closed doors. The Multistate Proxy Advisor Coalition has formed to pool resources and legal strategies, signaling this will be litigated at scale across state lines.
The complaint also alleges a glaring conflict of interest: that ISS offered consulting services to companies it was supposed to be rating, without disclosure. Nebraska described that practice as “a health inspector selling cleaning services on the side,” arguing it erodes trust and gives firms the ability to profit from both judging and advising the same clients. The potential for self-dealing is central to the states’ push for new rules or penalties.
Political pressure has followed the legal moves. President Trump signed an executive order directing federal regulators to scrutinize the proxy advisory industry and called out firms for using influence to “advance and prioritize radical politically-motivated agendas.” State officials such as West Virginia Attorney General JB McCuskey framed the litigation as a defense of industries and values they believe were targeted by proxy-driven boardroom reshaping.
“ISS has, itself and through its proxies, exerted massive, secretive influence over major portions of our economy, leading to a restructuring of board rooms into political machines designed to destroy coal, gas and many of the values that West Virginians hold dear,” McCuskey said. “That stops today.”
For everyday investors this case raises a basic question: who is steering the vote on your retirement savings and to what end? If proxy advisors are making recommendations that shift corporate strategy without transparent financial analysis, then states argue those firms are not just advising—they are imposing a political agenda using other people’s money. That tension between investor protection and ideological influence sits at the heart of the suits.
What comes next will matter for corporate governance and the balance of power in shareholder voting. Plaintiffs seek fines, bans on certain practices, and restitution for investors they say were harmed by undisclosed advocacy. The litigation promises a test of how states can regulate powerful private firms that operate across borders and how much sway proxy advisors should retain over American companies and capital markets.
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