Under pressure, proxy adviser Glass Lewis to end benchmark recommendations

By Ross Kerber

Oct 14 (Reuters) - Major proxy adviser Glass Lewis will no longer offer its "benchmark" voting recommendations starting in 2027 and instead will offer a set of new options for clients, according to a company spokesperson on Tuesday.

In a position paper sent by Glass Lewis, the company cites a growing split between how U.S. and European investors approach issues like fiduciary duty and sustainability.

The spokesperson also said the change was indirectly a result of criticism the firm has faced from U.S. Republican politicians. "The whole geopolitical environment is attached to this," the spokesperson said.

Glass Lewis and its rival Institutional Shareholder Services, or ISS, have been under pressure from politicians aligned with corporate managers, as topics like executive pay and climate politics drew more attention at corporate annual meetings.

In Texas, for instance, the two firms face an investigation by the state's Republican Attorney General over whether they violated consumer-protection laws including rules on disclosing material facts. The companies have denied wrongdoing, and separately won preliminary injunctions blocking a new state law that would have required them to tell clients their advice on environmental, social and governance matters does not solely serve shareholders' financial interests.

In its paper on Tuesday, Glass Lewis said it plans to use AI technologies to move "away from a one-size-fits-all approach to a highly customized, client-centric framework." Clients will be able to craft their own voting frameworks, and it will produce research to support various voting perspectives including those focused on management views, governance or sustainability priorities.

An ISS spokesperson said it will maintain its benchmark policy but noted it introduced new products for investors including research that does not include voting recommendations.

Aaron Bertinetti, CEO of Investor Engagement, North America for Computershare, a business that includes shareholder outreach and investor relations, said he expects both functions will become more important as the blocs of investor votes formed by proxy adviser recommendations become smaller.

Previously, companies could easily identify which investors they should try to influence. "Now the influence is getting dispersed and much harder to track," Bertinetti said.