A proxy firm (also called a proxy advisor, proxy adviser, proxy voting agency, vote service provider or shareholder voting research provider) provides services to shareholders (in most cases an institutional investor of some type) to research and provide analysis proposals being put up for a vote by shareholders using the principles of good corporate governance. These votes generally, but not always, occur at either the annual general or special meeting. Votes analyzed include, election (usually uncontested except in the case of a proxy contest) of all or some (in the case of a classified Board) Board members, ratification of compensation or "say-on-pay" in the US, Canada and many European Nations, ratification of the auditors, and changes in the company's bylaws. Additionally shareholder proposals about the items listed above and other important issues such as the companies strategy and exposure to climate change risk and other important or relevant social and environmental issues that may have a significant impact to the companies long term performance and viability often are voted upon by shareholders.
In general most proxy firms today also provide seamless voting according to their vote recommendations generally using an electronic or web based platform of some type where clients can review said votes and analysis should they wish to.
Additionally many providers include or sell additional products and services related to analyzing and rating the overall governance of an issuer. Examples of this include the Egan-Jones Compensation Rating and the ISS Quickscore.
Firms in the industry include:
- Egan-Jones Proxy Services, part of Egan-Jones Ratings Company (USA) 
- Glass, Lewis & Co (USA based, Canadian owned)
- InGovern Research Services (INDIA)
- Institutional Shareholder Services (USA)
- Institutional Investor Advisory Services India Limited (IiAS) (IN)
- Stakeholders Empowerment Services (SES) (INDIA)
Although several of the largest firms are based in the USA, according to their websites, most industry participants offer global coverage and new firms like Institutional Investor Advisory Services India Limited (IiAS) have arisen outside the US as well.
Proxy Firms came of age with the 1988 Department of Labor's Letter on ERISA Fiduciary Standards (Avon Advisory Letter) and the follow-up 1990 Monks Advisory letter which firmly stated the fiduciary responsibility of investment managers regulated under ERISA to document and vote proxies of the stock they owned. This was followed by the SEC's 2004 Egan-Jones Letter which indicated how a Proxy Voting Firm could function as an independent third party for making proxy voting recommendations even when providing products and services to issuers, provided certain requirements where adhered to.
The role of proxy firms has come under considerable scrutiny in recent years, most notably from the US corporate lobby. Many are concerned about the outsized influence such firms have on proxy contests, executive compensation, and director elections. According to Broadridge Financial Solutions during the first half of 2015 individual investors, as opposed to institutional investors, only voted 28% of the shares they controlled, a percentage which has been in decline.
While a 2007 report by the U.S. Government Accountability Office, shows ISS with a significant market lead over the next two largest firms by number of clients, Egan-Jones and Glass Lewis, some time has passed without a similar survey by such an authoritative source.
Controversies, Conflicts of Interest and Regulatory Actions
A potential conflict of interest identified by the Government Accountability Office is that some owners of proxy firms do business with both issuers and investors. Analysis of executive remuneration, or executive pay, is a notable feature of the work of shareholder voting research. Some policymakers believe that increasing competition in the industry may improve service quality. For example, in 2010 a Securities & Exchange Commission consultation document asked whether certain issues in the proxy advisory industry, including conflicts of interest, are affected by limited competition.
In 2013 ISS agreed to pay the SEC a fine of $300,000 and retain an independent compliance consultant to settle charges that it failed to safeguard the confidential proxy voting information of clients.
Following the European Securities and Markets Authority (ESMA)'s push for self-regulation of the proxy advisory industry, a number of firms have come together to publish a series of Best Practice Principles for Shareholder Voting Research
The BPP Code Committee was chaired by Prof Dirk Zetzsche, Propter Homines Chair for Banking and Securities law at the Institute for Financial Services of the University of Liechtenstein and Director of the Center for Business & Corporate Law at Heinrich Heine University in Duesseldorf/Germany. His report on the proceedings of the Committee is available at Harvard Law Blog
- "An Introduction to Proxy Voting". The General Board of Pension and Health Benefits. Retrieved 2015-12-30.
- "Over One-Third of Companies Receive Poor Compensation Rating". Egan-Jones Proxy Services. 2015-07-06.
- Adam Brown (2014-10-31). "ISS expands corporate governance scoring". IR Magazine.
- McRitchie, James. "Egan-Jones Proxy Services Acquires ProxyTell". corpgov.net. CorpGov.net. Retrieved 14 June 2014.
- McRitchie, James. "Pai Backs India's InGovern Proxy Service". corpgov.net.
- J. de la Merced, Michael. "Vestar to Buy I.S.S., an Influential Shareholder Adviser". New York Times. Retrieved 14 June 2014.
- James McRitchie (May 28, 2014). "Fiduciary Duty to Announce Votes (Part 2): Historical Background". CorpGov.net.
- Douglas Scheidt and Kent S. Hughes (May 27, 2004). "Investment Advisers Act of 1940 - Rule 206(4)-6 Egan-Jones Proxy Services". SEC and Egan-Jones Proxy Services.
- Alistair Barr & Jonathan Burton (2007-06-11). "Controversy ignites competition among proxy firms". Marketwatch.
- NICHOLAS DONATIELLO And HARVEY L. PITT (2015-05-28). "Protecting Shareholders From Activist Proxies". The Wall Street Journal.
- "2015 PROXY SEASON WRAP-UP". Broadridge & PWC. 2015.
- GAO (2007). "Issues Relating to Firms That Advise Institutional Investors on Proxy Voting" (PDF). GAO. p. 13].
- "The influence of proxy advisory firms on executive remuneration". Guerdon Associates. 2007-01-10.
- Zac Bissonnette (2008-01-15). "Proxy firm questions Tyson chief's pay".
- "Proxy Plumbing Concept Release" (PDF).
- "SEC Charges Institutional Shareholder Services in Breach of Clients' Confidential Proxy Voting Information". SEC. 2013-05-23.
- "Best Practice Principles for Shareholder Voting Research". 2014.
- "Best Practice Principles for Proxy Advisors and Chairman's Report". 2014.