Large index fund managers are quick to assert their stewardship teams do their own work — uninfluenced by proxy advisory firm recommendations, especially when it comes to heated director contests.

However, a review of U.S. director contests that went to a vote through September, including one prominent “vote no” campaign, found that there is some correlation between recommendations made by Institutional Shareholder Services Inc. and Glass, Lewis & Co. LLC and the votes of the big three index fund managers, BlackRock Inc. (BLK), State Street Corp. (STT) and Vanguard Group Inc.

“While the big index funds have their own internal guidelines for proxy contests, our data suggests that in a majority of campaigns, their vote aligns with proxy adviser recommendations,” said Waheed Hassan, founder of ZMH Advisors.

In 17 cases in which BlackRock cast a vote on a director contest in 2023 about 75% of the time its vote was either partly or completely consistent with the ISS recommendation, Hassan said. ZMH’s analysis of Vanguard and State Street produced similar results, he said.

“There could definitely be a level of correlation, but it is not causation. That is an important distinction,” one corporate adviser said.

The correlation between proxy advisers and index fund votes in contests exists because at “a high level” the systems for both institutional investors and advisers are geared towards representing the best interests of shareholders,” the adviser said.

“It may be a different path to the same objective,” the adviser said, adding: “They would of course look at ISS and Glass Lewis recommendations but that would be a data point.”

While there’s a relationship between ISS and Glass Lewis recommendations and voting of index funds, there are nuances to the results of situations that went the distance in 2023, and exceptions to the trend.

Editor’s note: The original, full version of this article was published Nov. 17, 2023, on The Deal’s premium subscription website. For access, log in to TheDeal.com or use the form below to request a free trial.