Proxy Firms Expand First Amendment Legal Fight Into More States

Lawsuits from the country’s biggest proxy advisers are stacking up as a spat with Texas morphs into a multistate court battle.

Institutional Shareholder Services and Glass, Lewis & Co. in April sued two more states, Indiana and Kansas, over laws compelling the firms to tell shareholders and update websites if their voting advice contradicts management’s wishes.

The laws, both of which are scheduled to take effect July 1, violate the First Amendment by forcing speech only in certain situations, the recent lawsuits allege. They also illegally regulate out-of-state commerce and impose unconstitutionally vague provisions, the lawsuits said.

Proxy advisers, which can promote shareholder causes at odds with company management, have become a popular target for activists who say the firms have outsize influence over corporate strategy and culture. President Donald Trump in December directed the Securities and Exchange Commission to find ways to restrain them. But this month’s cluster of lawsuits shows the firms’ battle has expanded beyond the Trump administration to states, at least a dozen of which had legislation targeting the firms as of February.

“It is hard to imagine a more plainly viewpoint-discriminatory law,” ISS said in a lawsuit against Kansas filed April 29 in the US District Court for the District of Kansas. “The law’s goal is to force ISS to walk the line that corporate executives want—even if ISS and its clients believe that course of action is wrong.”

Investors use proxy firms to weigh voting options for a variety of annual meeting proposals, such as board composition, executive pay, stockholder rights, and environmental, social and governance issues. The lawsuits, the most recent of which was filed Thursday by Glass Lewis against Indiana, build on a legal battle the firms launched last summer over a similar Texas law.

Indiana’s law represents a “fundamental misunderstanding of the nature of corporate governance issues and how proxy guidance informs investor decision-making,” Glass Lewis said in an emailed statement. It also “invites meritless litigation” and “creates friction for investors that rely on our insights to fulfill their fiduciary duties.”

ISS pointed to an April 14 statement in response to a request for comment, and offices of the Indiana and Kansas attorneys general could not immediately be reached Thursday afternoon.

‘Conspicuous’ Disclosures

When public companies file proxy statements ahead of annual shareholder meetings, boards provide written recommendations for how shareholders should vote on both management proposals and investor proposals. Usually, this means recommending votes in favor of company business and against shareholder ideas, which often ask companies to prepare reports or change a governance practice.

Proxy advisers like ISS and Glass Lewis said they provide independent research. Kansas’ and Indiana’s laws impose new requirements on that practice. If firms’ voting recommendations fall out of line with company views, they must provide “clear and conspicuous” disclosures to shareholders and on websites when their advice isn’t based on a written financial analysis, the statutes say.

The provision undermines proxy advisers’ credibility by forcing them to disparage themselves unless they agree with company management, Glass Lewis said in its lawsuit against Indiana filed Thursday in the US District Court for the Southern District of Indiana.

“Clients will be confused and misled by these disclosures,” according to the complaint. “Clients may wrongly believe that Glass Lewis has conducted no analysis at all on these matters and that a vote the other way is backed by more financial analysis.”

Under these state laws, advisers aren’t home free even if they say they used a financial analysis to recommend an anti-management outcome: They must automatically serve companies a copy of that rationale and make it available to shareholders upon request. The report must include an explanation of the short- and long-term financial benefits of the decision, as well as methodology.

Too Many Unknowns, Firms Say

The state laws also ignore a crucial fact, ISS said in its complaints against Kansas and Indiana: Many issues that come up at annual meetings don’t lend themselves to financial analyses, such as whether to reelect a board member who has missed too many meetings.

Glass Lewis cited a similar concern in its litigation: “There is no obvious way to assign a dollar figure to a vote for one director over another, a vote to ratify or reject a particular auditor, or a vote for or against a nonbinding shareholder proposal,” according to its Indiana complaint.

The two firms said they aren’t only concerned about a compliance hassle—though Glass Lewis said the burden would likely be overwhelming. They’re concerned about what compliance actually means.

Terms of the state laws are too vague, ISS and Glass Lewis both said. The “labyrinthian” requirements open doors for attorney general enforcement against “politically disfavored speakers” like ISS, according to the firm’s Kansas complaint.

“The resulting uncertainty itself causes harm,” Glass Lewis said in its Indiana complaint.

Yetter Coleman LLP is representing Glass Lewis in its case against Indiana.

Lathrop GPM LLP is representing ISS in its case against Kansas. Hogan Lovells US LLP and FBT Gibbons LLP are representing the firm in its case against Indiana.

The cases are Glass Lewis v. Rokita, S.D. Ind., No. 1:26-cv-00862, complaint filed 4/30/26, ISS v. Kobach, D. Kan., No. 2:26-cv-02254, complaint filed 4/29/26, and ISS v. Rokita, S.D. Ind., No. 1:26-cv-00717, complaint filed 4/13/26.