This morning MSCI Inc. announced that it will be seeking strategic alternatives for its Institutional Shareholder Services, Inc. (ISS) business [you can read the press release here: http://www.issgovernance.com/pressISS103113] . This represents the start of a process that may eventually lead to a full separation of ISS from MSCI. However, as MSCI points out, it is not certain that any transaction will occur with respect to ISS.
MSCI joins a growing list of companies that controlled ISS only to find that it might not provide the right synergies with corporate-focused sales and services (since many corporate issuers have a big issue in buying anything from a company that controls ISS).
Frankly, depending on the outcome of this process, it could lead to some significant changes to ISS policies, both current and future, as well as to the policy development process. It might be time for ISS and MSCI to consider what transpired when Glass Lewis & Co. put itself on the block a few years back and ended up being purchased by the Ontario Teachers’ Pension Plan Board (“OTPP”) and Alberta Investment Management Corp. (“AIMCo”). It may make sense for a consortium of large institutional shareholders to acquire ISS and effectively use it as their “outsourced” research office. The research could then continue to be sold to other institutional shareholders and corporate issuers. We’ll have to wait and see what alternatives get explored and where things come out and if it means any change for ISS.