🗞️ Watchdogs on Notice: DOL Declares Proxy Advisors Are ERISA Fiduciaries

The federal government moved Wednesday to bring the largely unregulated proxy advisory industry under the full weight of retirement plan law, issuing guidance that would classify firms like Institutional Shareholder Services and Glass Lewis as fiduciaries under the Employee Retirement Income Security Act of 1974.

The Department of Labor's Employee Benefits Security Administration released Technical Release 2026-01, concluding that proxy advisory firms routinely meet the criteria for investment advice fiduciaries under ERISA's longstanding five-part test. The release is the first of its kind to formally apply that legal standard to the proxy advisory business.

ISS and Glass Lewis collectively control more than 90 percent of the U.S. proxy advisory market, advising institutional investors, including pension and 401(k) plans, on how to cast shareholder votes on matters ranging from board composition to executive pay. Under the new guidance, when those firms provide voting recommendations to ERISA-governed retirement plans on an ongoing, fee-based basis, they will generally be treated as fiduciaries bound by the law's strict loyalty and prudence requirements.

The guidance is a direct outgrowth of a December 2025 executive order in which President Trump directed the Labor Department, the Securities and Exchange Commission and the Federal Trade Commission to scrutinize the proxy advisory industry. The order singled out ISS and Glass Lewis by name, asserting that both had used their market position to steer clients toward shareholder votes aligned with environmental, social and governance priorities and diversity, equity and inclusion initiatives rather than investor financial returns. ISS is incorporated in the United States but majority-owned by Deutsche Börse Group, the German exchange operator. Glass Lewis, headquartered in San Francisco, has been majority-owned by Peloton Capital Management, a Toronto-based private equity firm, since 2021.

The implications for retirement plan sponsors and investment managers could be substantial. ERISA fiduciary status obligates firms to act solely in the financial interest of plan participants, follow a rigorous prudence standard and manage conflicts of interest. For proxy advisors, that standard could constrain how they develop voting recommendations and whether they can continue offering broadly uniform guidance to clients with differing investment mandates.

The guidance also reaches beyond proxy advisors. Labor Department officials said they examined whether large asset managers, sovereign wealth funds and the operators of proxy voting infrastructure could also qualify as functional fiduciaries under ERISA, signaling that the administration's scrutiny of ESG-influenced investment practices extends well past the advisory firms themselves.

Not everyone views the guidance as a straightforward application of existing law. Lisa Gomez, who led EBSA under the Biden administration and now heads LMG Collaborative Consulting Solutions, said the release "isn't a clarification of fiduciary principles" but rather "guidance shaped to reinforce a broader political narrative." She argued that characterizing certain recommendations as politically motivated introduces a subjective standard that could prove difficult to administer consistently.

Both ISS and Glass Lewis began adapting their practices well before Wednesday's announcement. Glass Lewis said it would move away from standardized house recommendations starting in 2027, instead offering clients customized voting frameworks organized around four distinct perspectives. ISS revised its 2026 proxy voting guidelines to pull back from broadly supporting environmental and social shareholder proposals. Neither company responded to requests for comment on the new guidance.

Key Points

• EBSA Technical Release 2026-01 finds that proxy advisory firms generally qualify as ERISA investment advice fiduciaries under the agency's five-part test, the first time the Labor Department has applied that standard to the industry.
• The guidance covers ISS and Glass Lewis, which together hold more than 90 percent of the U.S. proxy advisory market, as well as large asset managers, sovereign wealth funds and proxy voting infrastructure operators.
• Fiduciary status under ERISA requires firms to act solely in participants' financial interest, follow a prudence standard and manage conflicts of interest, obligations that could materially reshape how voting recommendations are developed and delivered.
• The release follows President Trump's December 11, 2025 executive order directing the DOL, SEC and FTC to increase oversight of proxy advisors, citing concerns about ESG and DEI-driven recommendations.
• Both ISS and Glass Lewis have already modified their policies in response to mounting regulatory pressure, ahead of any formal rulemaking.
• Critics, including former EBSA head Lisa Gomez, contend the guidance substitutes political judgments for legal clarity, while supporters argue it is a necessary corrective for an industry that has operated largely outside federal fiduciary standards.

Primary Source Author: U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Primary Source: Technical Release 2026-01, Proxy Advisors as Investment Advice Fiduciaries Under ERISA

Primary Source Link: DOL EBSA Technical Release 2026-01

Supplemental Links

• DOL EBSA Press Release, April 15, 2026
• White House Executive Order, Protecting American Investors from Foreign-Owned and Politically Motivated Proxy Advisors, Dec. 11, 2025
• Morrison Foerster, Executive Order Analysis
• Gibson Dunn, Executive Order Summary
• Latham & Watkins, ERISA Implications
• Winston & Strawn, Key ERISA Implications
• Harvard Law School Forum on Corporate Governance, Pros and Cons for Companies
• NAPA-Net, DOL Coverage