When it comes to activism, shareholder advisory firms like Institutional Shareholder Services and Glass Lewis usually hold a lot of power, or at least that has been the case historically. However, that’s obviously changing as institutional investors are starting to lean more on their own proprietary analysis rather than just siding with advisory firms.

ISS support didn’t win DuPont for Peltz

Perhaps one of the biggest upsets in activism history was earlier this year when DuPont shareholders narrowly sided with management over Nelson Peltz’s Trian Fund Management. Peltz was attempting to take control of the chemical manufacturer’s board of directors and was widely expected to win because he had the support of both ISS and Glass Lewis. He came up a bit short with 46% of shareholder support, however.

Activist Insight took a closer look at the history of ISS and Glass Lewis and the role of proxy advisory firms like them in activism. The firm notes that a number of individual investors seem to be trying to reduce the influence of such firms, although their influence remains high, according to the numbers from recent contested director elections.

ISS, Glass Lewis still influential in activism

Activist Insight conducted a new study on contested director election over the past two years. According to the publication, the top ten institutional investors voted with ISS or Glass Lewis more than 90% of the time.

However, it’s important to note that ISS and Glass Lewis don’t always make the same recommendation as they did in the DuPont activism case when they both sided with Peltz. Also it appears that investors side with Glass Lewis more often than they do with ISS (Chart is courtesy Activist Insight.):

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Glass Lewis preferred over ISS

Overall, institutional investors sided with ISS an average of 91% of the time and Glass Lewis 94% of the time. This is particularly interesting because, as Activist Insight notes, ISS is seen as being more established than Glass Lewis.

The publication also discovered that two of the biggest institutional investors sided with Glass Lewis 100% of the time in 2013 and 2014. The firms were Wellington and Fidelity. Further, JPMorgan, BlackRock and State Street were not in agreement on more than 10% of the cases.

These numbers certainly demonstrate that support from ISS certainly does not mean a win, as Peltz learned with DuPont.

Firms reveal votes on DuPont

Activist Insight was able to collect data on some of DuPont's biggest investors and the way they voted. For example, CalPERS explained several reasons why it supported DuPont. Among the reasons were the company's recent performance, Moody's warning about what might happen to DuPont's credit rating if Peltz got his way, and management's attempts to reach a settlement with Peltz. Activist Insight also notes that CalPERS was already talking with DuPont about adding proxy access.

So while institutional investors are probably listening to what ISS and Glass Lewis have to say, they're also deploying their own analysis on a case by case basis.