Trump Issues Executive Order Targeting Proxy Advisors and Shareholder Proposals

On December 11, 2025, President Trump issued an Executive Order titled “Protecting American Investors From Foreign-Owned and Politically Motivated Proxy Advisors,” which is aimed at “increas[ing] oversight of and tak[ing] action to restore public confidence in the proxy advisor industry, including by promoting accountability,  transparency, and competition.” Targeting the proxy advisors as “foreign-owned,” the Executive Order states:

[T]hese proxy advisors wield enormous influence over corporate governance matters, including shareholder proposals, board composition, and executive compensation, as well as capital markets and the value of Americans’ investments more generally, including 401(k)s, IRAs, and other retirement investment vehicles. These proxy advisors regularly use their substantial power to advance and prioritize radical politically-motivated agendas — like “diversity, equity, and inclusion” and “environmental, social, and governance” — even though investor returns should be the only priority. For example, these proxy advisors have supported shareholder proposals requiring American companies to conduct racial equity audits and significantly reduce greenhouse gas emissions, and one continues to provide guidance based on the racial or ethnic diversity of corporate boards.

The Executive Order mandates that:

(i) the Securities and Exchange Commission (SEC) Chairman (a) review all rules, regulations, guidance, bulletins, and memoranda relating to proxy advisors, and consider revising or rescinding them, especially to the extent that they implicate “diversity, equity, and inclusion” (DEI) and “environmental, social, and governance” (ESG) policies; (b) enforce the Federal securities laws’ anti‑fraud provisions with respect to material misstatements or omissions contained in proxy advisors’ voting recommendations (and, presumably, the accompanying reports); (c) assess whether to require proxy advisors to register as Registered Investment Advisers; and (d) consider requiring proxy advisors to provide increased transparency on their recommendations, methodology, and conflicts of interest, especially regarding DEI and ESG;

(ii) the SEC Chairman consider revising or rescinding all rules, regulations, guidance, bulletins, and memoranda relating to shareholder proposals, including Exchange Act Rule 14a-8, that are inconsistent with the purpose of the Executive Order;

(iii) the SEC Chairman analyze whether a proxy advisor serves as a vehicle for investment advisers to coordinate and augment their voting decisions with respect to a company’s securities and, through such coordination and augmentation, form a “group” for purposes of the Exchange Act;

(iv) the Federal Trade Commission (FTC) Chairman investigate whether proxy advisors engage in unfair methods of competition or unfair or deceptive acts or practices that harm United States consumers or engage in conduct that violates the federal antitrust laws; and

(v) the Secretary of Labor (a) revise regulations and guidance regarding the fiduciary status of individuals who manage or, like proxy advisors, advise those who manage shares held by plans covered under the Employee Retirement Income Security Act of 1974 (ERISA), including proxy votes and corporate engagement, consistent with the Executive Order; and (b) strengthen the fiduciary standards for ERISA plans, including assessing whether proxy advisors act solely in the financial interests of ERISA plan participants.

The Executive Order is the latest in a series of legislative and regulatory actions targeting proxy advisors. As we previously discussed, the House of Representatives Financial Services Committee held a hearing in April 2025 titled “Exposing the Proxy Advisory Cartel: How ISS & Glass Lewis Influence Markets,” and the House of Representatives Judiciary Committee held a hearing in June 2025 titled “The Proxy Advisor Duopoly’s Anticompetitive Conduct.”  In addition, the Attorneys General of Florida, Missouri, and Texas have announced investigations into Institutional Shareholder Services (ISS) and Glass Lewis regarding alleged misleading representations about their consideration of ESG factors and potential consumer protection law violations. Texas also adopted SB 2337, a law requiring proxy advisors to disclose whether their recommendations for Texas companies are based on non-financial factors like ESG or DEI, but a preliminary injunction has been issued, putting the new law on hold, with the trial currently scheduled for February 2026. Glass Lewis has already indicated that, starting in 2027, it will no longer publish its benchmark policy guidelines or provide research and voting recommendations based upon its benchmark guidelines.

The Executive Order also marks the latest development with respect to Rule 14a-8 proposals. As we previously discussed, the SEC has reconsidered its “role in the Rule 14a-8 process for the 2025-2026 proxy season” and will not be responding to no-action requests regarding the exclusion of shareholder proposals under Rule 14a-8, other than requests to exclude proposals that are improper under state law, pursuant to Rule 14a-8(i)(1). The SEC Chairman previously indicated that precatory shareholder proposals may not be a “proper subject” for action by shareholders under certain state laws.

In a proxy season that is already rife with uncertainty, the issuance of the Executive Order adds an additional layer of complexity. The growing scrutiny of ISS and Glass Lewis will increase pressure on investors to undertake their own voting analysis and not rely primarily on the recommendations of the proxy advisors, which may be burdensome, particularly for large institutional investors who own shares in many companies and have to cast votes on thousands of routine matters. And, as we saw when the SEC published new C&DIs on the availability of 13G, investors may await guidance on how their use of proxy advisory services could affect their Schedules 13D and 13G filing obligations. For companies, voting outcomes may become less predictable if the influence of ISS and Glass Lewis subsides although it may increase opportunities to solicit in support of company initiatives.

It remains to be seen how the SEC, FTC, and Department of Labor will act on the mandates in the Executive Order, and whether the SEC will place significant limitations on the proxy advisors’ ability to make recommendations with respect to DEI and ESG policies and practices. Notably, the Executive Order, and the corresponding regulatory scrutiny, does not extend to index funds, who are often supportive of companies in contested situations and are critical stalwarts against short-termism.