A global shareholder advisory firm is challenging a new Oklahoma law that would require proxy advisory firms to justify their advice when recommending a vote against company management on shareholder resolutions at annual meetings.
The lawsuit comes as the Oklahoma State Pension Commission is halfway through its own analysis of thousands of shareholder votes on behalf of the state’s seven retirement systems. State Treasurer Todd Russ directed that effort.
Institutional Shareholder Services Inc. filed its lawsuit over House Bill 4429 last month. It wants a federal judge to issue a preliminary injunction before the law takes effect Nov. 1.
ISS said the law infringes on its free speech rights and imposes additional compliance costs on advice to clients such as pension systems and other institutional investors.
The law is the latest example of copycat legislation, which is introduced across multiple states, to be challenged in court.
Gov. Kevin Stitt signed HB 4429 in May. The bill passed despite a federal judge in Waco, Texas, putting a similar Texas bill on hold in August 2025. Even so, more than a dozen other states considered bills regulating proxy advisory services in their legislative sessions this year.
Federal judges in Kansas and Indiana temporarily blocked enforcement of proxy advisory transparency bills passed earlier this year in those states in June.
Shareholders of public companies vote annually on a variety of issues, including routine matters such as executive pay, board of director elections and selecting audit firms. Company management proposes the vast majority of shareholder resolutions. Proxy advisory firms offer their advice on how shareholders should vote.
Until recently, those votes were relatively uncontroversial. But shareholders can also ask companies to put other items on the agenda, such as corporate statements on the environment or human rights. Conservative policy groups have targeted those resolutions, saying they distract public companies from their main purpose of increasing shareholder value. Only a tiny percentage of shareholder-proposed resolutions win approval.
The Oklahoma attorney general’s office, which would be responsible for enforcing HB 4429 under the state’s Consumer Protection Act, denied ISS’s allegations in its initial filing in federal court.
In its petition for a preliminary injunction, ISS attorneys said the Oklahoma law would require it to perform written financial analysis about proxy voting advice only if it recommends a vote against company management.
“The voting decisions upon which ISS is called to make recommendations frequently involve qualitative issues that do not lend themselves to quantification,” the lawsuit said. “Although ISS’ proxy voting reports and recommendations often contain many pages of financial information and analysis, ISS does not purport to quantify or model the financial impact on company stock value of a particular vote recommendation.”
ISS said it provides voting advice to a variety of clients according to their wishes, including custom policies for religious beliefs, labor unions and environmental issues. Among its newest offerings is a proxy voting policy for those skeptical of environmental, social and governance issues. That uses a framework developed by Bowyer Research, which is already being used by the investment board of the Oklahoma Tobacco Settlement Endowment Trust.
“HB 4429 singles out proxy advisors for special regulation; the law does not apply to other speakers who also advise on votes, including company boards, shareholders, those who solicit proxy votes and charities,” the ISS filing said.
Model Legislation Filed in Multiple States
The Oklahoma law is similar to model legislation pushed by Consumers Defense, a Virginia-based nonprofit group that said it fights environmental, social, and governance investing principles, known as ESG, and so-called woke capitalism.
Sal Nuzzo, executive director of Consumers Defense, filed written testimony in favor of the Kansas version of the bill in March. Proxy advisory firm Glass Lewis & Co. LLC opposed the Kansas bill.
Kansas Gov. Laura Kelly, a Democrat, vetoed the bill, but the Republican-led legislature overrode the veto.
Unlike Kansas, Oklahoma does not allow non-lawmakers to file public comments on pending legislation during committee hearings.
Oklahoma House Speaker Kyle Hilbert, R-Bristow, authored HB 4429. Hilbert used opposition to the bill from an environmental group as a reason to vote for the bill when he presented it Feb. 10 in a House committee. Rep. Mark Lepak, R-Claremore, shepherded the bill through a House oversight committee on March 5 and said the Speaker’s office worked with an outside group on some of the language.
Hilbert spokeswoman Caroline Estes said the language for HB 4429 did not come directly from advocates in Texas.
“It was brought to Speaker Hilbert’s attention, and he felt strongly about getting the legislation done,” Estes said Tuesday.
Hilbert, in a written statement, said he wasn’t surprised to see the ISS lawsuit.
“Their opposition to the bill further proves our point of a greater need for transparency,” Hilbert said. “We are going to continue fighting for shareholders.”
Pension Commission Studies Proxy Votes
Earlier this year, Russ, who lost in the June Republican primary to challenger Cindy Byrd, directed RVK Inc. to compile a report on how the state’s seven pension systems voted on shareholder resolutions in 2025. RVK, the investment consultant for the State Pension Commission, presented its preliminary report Tuesday at the commission’s meeting.
RVK representatives said they reviewed more than 50,000 lines of proxy voting data across dozens of data points from public companies that had investments from Oklahoma retirement systems. They tried to categorize the votes broadly on either pro-environmental or pro-social metrics, as well as more typical governance proposals adopting simple majority voting instead of supermajority requirements for passage.
“There currently is no statutory definition for an ‘ESG proposal,’ and the different organizations may have different criteria for categorizing these votes,” the report said. “Subcategories such as anti-traffic, anti-weapon etc. are also subjective and will differ between organizations.”
The report said pro-environmental and pro-social proposals made up 2% of all the votes, but about one in four of the proposals put forward by shareholders. Most of the shareholder proposals at annual meetings were over corporate governance.
“As is typical for public equity portfolios, when votes against management were cast, the vast majority were related to director elections,” the report said. “The reasons for opposition were typically related to material governance concerns such as a director failing to attend a minimum number of meetings, or for failing to qualify as an ‘independent’ member where a minimum number of independent members is a guideline to the voting policy.”
RVK representatives said they would provide additional details on the proxy voting review at the pension commission’s Nov. 4 meeting.
Editor's Note: This story was updated to clarify the process by which shareholders can propose resolutions at annual meetings.
This article first appeared on Oklahoma Watch and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.