Risk & Compliance

ISS and IRRC to Merge

''It's a bit startling,'' says one observer, considering that the two proxy-research companies have been seen as ''archenemies.''
Stephen TaubJuly 14, 2005

Institutional Shareholder Services (ISS) has agreed to acquire the commercial business of the Investor Responsibility Research Center (IRRC) in a merger of two fierce proxy-research rivals located in the Washington, D.C., area.

ISS will pay in excess of $10 million, though it would not specify an exact amount, according to The Wall Street Journal; some of the proceeds will be earmarked the IRRC Institute for Corporate Responsibility. This new institute, which will be a completely independent entity, will provide “insights to shareholders and companies and effecting positive change in the area of corporate responsibility and social issues.”

In the past 15 months, ISS has completed acquisitions of Deminor Rating in Europe and Proxy Australia. By acquiring IRRC’s research, proxy voting, and screening business, ISS will be able to provide “access to a global network of local experts and an integrated end-to-end platform to facilitate research distribution and vote execution,” said president and chief executive officer John M. Connolly, in a statement.

Unlike ISS, which offers recommendations in its research, IRRC has been known for a neutral policy that avoids specific recommendations.
The Associated Press observed that ISS has been accused of conflicts of interest since it advises companies on governance and other issues while simultaneously offering recommendations to institutional investors. On the other hand, noted the Journal, IRRC has struggled during the last four years since becoming a for-profit company.

“The market shift toward globalization, integration, and straight-through electronic vote processing has resulted in the need for technology enablement, local market expertise, and global scope,” said Linda Crompton, president and chief executive officer of IRRC, in the ISS press release.

In an interview with the AP, she conceded, “It’s a bit startling.” The two firms have been “absolutely pitched against each other and seen as archenemies.”

Crompton also told the wire service that the IRRC Institute for Corporate Responsibility “will be a pure think-tank focused on meeting the needs of the investment community.”