On December 11, 2025, President Donald Trump issued an executive order (EO) titled “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors,” which directs a government-wide response to enhance oversight of proxy advisory firms with a particular focus on their use of non‑pecuniary factors in devising their proxy voting recommendations.
The order highlights concerns about the influence of major proxy advisors, specifically Institutional Shareholder Services Inc. (ISS) and Glass Lewis, over corporate governance outcomes (including shareholder proposals, board composition, and executive compensation) and investor returns. It seeks to promote accountability, transparency, competition, and alignment with fiduciary duties under federal securities and ERISA frameworks.
The EO directs the Securities and Exchange Commission (SEC) to review and, as appropriate, revise or rescind rules, guidance, and staff memoranda relating to proxy advisors that are inconsistent with the order’s purpose, particularly concerning DEI and ESG considerations. The SEC is also instructed to enforce anti-fraud provisions with respect to material misstatements or omissions contained in proxy advisor recommendations; evaluate whether to require proxy advisors to register as registered investment advisers; consider whether to require increased transparency from proxy advisors on their recommendations, methodologies, and conflicts, especially regarding DEI and ESG factors; analyze whether proxy advisors facilitate coordinated voting that could trigger Exchange Act §§ 13(d)/13(g) group formation; and assess whether registered investment advisers’ reliance on proxy advisor recommendations on non‑pecuniary factors is consistent with their fiduciary duties.
The Federal Trade Commission (FTC), in consultation with the Attorney General, is directed to investigate whether proxy advisors engage in unfair, deceptive, or anticompetitive practices including potential collusion, failing to adequately disclose conflict of interest disclosures, providing misleading information, undermining the ability of consumers to make informed choices, or otherwise engaging in conduct that violates antitrust laws.
The Department of Labor (DOL) is tasked with revising ERISA regulations and guidance to strengthen fiduciary standards for those who manage or advise on the exercise of shareholder rights, and with determining whether proxy advisors who provide advice for compensation should be treated as investment advice fiduciaries under ERISA. The DOL must assess whether proxy advisors act solely in the financial interests of plan participants and whether any practices undermine pecuniary value. The department must also enhance transparency around the use of proxy advisors, particularly in relation to DEI and ESG investment practices.
The EO is the latest in a series of attacks against the two largest proxy advisory firms, specifically with respect to their stance on DEI/ESG matters. The attorneys general of Florida, Missouri, and Texas have also launched investigations or filed lawsuits against the firms, alleging violations of state consumer protection and/or antitrust laws.
And the pressure seems to be working. Glass Lewis recently reported that it is phasing out its “benchmark” voting guidelines (beginning in 2027), and ISS has adopted a “case-by-case” approach for many ESG shareholder proposals beginning with the 2026 proxy season. Critics argue that these changes could lead to less predictable voting outcomes and negatively impact shareholder rights.