Executive Order Targets Proxy Advisors And Related DEI & ESG Policies

On December 11, 2025, the President signed an Executive Order titled "Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors" (the "EO"). The EO focuses on the influence of proxy advisory firms, specifically Institutional Shareholder Services ("ISS") and Glass, Lewis & Co. ("Glass Lewis"). According to the EO, ISS and Glass Lewis control over 90% of the proxy advisory market.

Among its directives, the EO instructs the Securities and Exchange Commission (the "SEC") Chair to review all rules, regulations, guidance, bulletins, and memoranda relating to proxy advisors. The EO further instructs the SEC Chair to consider revising or rescinding any such materials that are inconsistent with the purposes of the order. The EO particularly targets policies and guidance that implicate diversity, equity, and inclusion ("DEI") and environmental, social, and governance ("ESG"). In addition, the EO directs the SEC Chair to consider revising or rescinding rules, regulations, guidance, bulletins, and memoranda relating to shareholder proposals, including Rule 14a‑8. Further, the EO directs the SEC Chair to:

• Enforce antifraud provisions of the federal securities laws with respect to material misstatements or omissions contained in proxy advisors' proxy voting recommendations.
• Assess whether proxy advisors whose activities fall within the scope of the Investment Advisers Act of 1940, as amended, and the rules promulgated thereunder, should be required to register as investment advisers.
• Consider requiring proxy advisors to provide increased transparency regarding their recommendations, methodologies, and conflicts of interest, especially with respect to DEI and ESG factors.
• Analyze whether, and under what circumstances, a proxy advisor may serve as a vehicle for investment advisers to coordinate and augment their voting decisions with respect to a company's securities and, through such coordination, form a "group" for purposes of Sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934, as amended.
• Direct SEC staff to examine whether the practice of registered investment advisers engaging proxy advisors and following their recommendations regarding non-pecuniary factors in investing—including, as appropriate, DEI and ESG factors—is inconsistent with advisers' fiduciary duties..

The EO also directs the Chair of the Federal Trade Commission ("FTC"), in consultation with the Attorney General, to review ongoing state antitrust investigations into proxy advisors and determine whether there is a probable link between the conduct that is at issue in those investigations and violations of federal antitrust law. Further, the EO directs the FTC Chair to determine whether proxy advisors engage in unfair methods of competition or unfair or deceptive acts or practices. The review focuses in particular on collusion, undisclosed conflicts of interest, misleading information, conduct that impairs informed investor decision making, or other antitrust violations.

Finally, the EO directs the Secretary of Labor to take steps to revise all regulations and guidance regarding the fiduciary status of individuals who manage, or advise those who manage ERISA (Employee Retirement Income Security Act of 1974) plans, including handling proxy voting and corporate engagement, and to consider whether paid proxy advisors meeting certain criteria should be treated as ERISA investment advice fiduciaries.

The EO underscores the Trump Administration's continued scrutiny of the role proxy advisory firms play in shaping shareholder voting and engagement at public companies.

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