Governance consultant names new CEO

John M. Connolly, a veteran of IBM Corp. and a Cambridge high-tech start-up, was named chief executive of Institutional Shareholder Services, an influential consultant to large investors on corporate governance and proxy voting.

Connolly, 51, succeeds Jamie Heard, 57, an investor in the privately held firm, who will stay on as vice chairman and focus on governance research, rather than day-to-day operations. The Rockville, Md., firm has doubled its business in each of the last two years, Connolly said, after the scandals of the Enron era moved governance from a fringe concern to a cottage industry. The company employs 400 people.

With mutual funds under orders to start disclosing proxy votes on the stocks they hold, ISS is experiencing a spike in demand, as well as an entree to provide new services, such as vote-counting and tracking. Connolly calls governance "not only a trend but a megatrend," which is gaining ground abroad.

ISS was founded by shareholder activists Robert Monks and Nell Minow. It has 750 clients, including pension funds, mutual funds, and foundations, that use the firm's research and advice on how to vote corporate proxies. For example, ISS is placing greater scrutiny this year on corporate compensation; the firm is likely to recommend that clients vote against rich option packages for companies that have performed poorly -- or vote against the directors who approved such pay.

Connolly is more techie than shareholder activist. He is founder and former CEO of Mainspring Inc., a Cambridge consulting firm that was born in the Internet-bubble era and went public in July 2000, as the stock market was tanking. He sold the company to IBM for $80 million, although holders of the original $12 IPO shares lost money in the deal.

Beth Healy can be reached at bhealy@globe.com.