Risk & Compliance

How Much is that Watchdog in the Window?

Proxy advisor Institutional Shareholder Services (ISS) is reportedly up for sale.
Stephen TaubSeptember 6, 2006

Proxy advisor Institutional Shareholder Services (ISS) may be up for sale.

The owners of the firm, which rates the corporate governance practices of public companies and recommends how institutional investors should vote their proxies, are seeking between $400 million and $500 million, according to marketwatch.com, which in turn cited a report by Global Proxy Watch, a newsletter published by corporate governance consulting firm Davis Global Advisors.

In 2001, ISS was bought for a reported $45 million by private equity firm Warburg Pincus, along with institutional investor Hermes and other investors.

Corporate scandals at Enron, WorldCom, Adelphia and others, and the resulting emphasis on improved corporate governance have spawned a lucrative business of providing ratings and advice to shareholders on a wide range of issues that are voted upon at company annual meetings.

ISS, however, also has been criticized for selling corporate governance advisory services to the same companies it reports on, marketwatch.com points out.

The website speculates that potential buyers of ISS include credit rating agencies Moody’s Corp. and Standard & Poor’s Corp., as well as proxy administration services provider Automatic Data Processing Inc. and even financial services firm Computershare.

ISS says it has more than 1,667 clients and analyzes proxies and issues research and vote recommendations for more than 35,000 companies in 115 markets worldwide.

In recent years, ISS has made a number of acquisitions, including the commercial business of Investor Responsibility Research Center (IRRC).