Proxy Advisors In The Crosshairs: Securities Law Implications Of New Executive Order

On December 11, 2025, the White House issued an executive order (EO) and related fact sheet expressly targeting Institutional Shareholder Services (ISS) and Glass Lewis and asserting that the proxy advisors' influence has been used to advance "politically motivated" agendas in the shareholder voting process.

From a federal securities law perspective, the EO is principally a directive to the Chair of the US Securities and Exchange Commission (SEC) to conduct a top-down review of SEC rules and guidance relating to proxy advisory firms and shareholder proposals, including Rule 14a-8, and — consistent with the Administrative Procedures Act — to consider revisions or rescissions viewed as inconsistent with the EO's purpose, including those that implicate diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) policies. The EO also calls for enforcement of federal securities anti-fraud provisions against proxy advisors as applied to their proxy voting recommendations, assessment of whether proxy advisors should be required to register as registered investment advisers under the Investment Advisers Act, consideration of requiring increased transparency around proxy advisors' methodology and conflicts, analysis of whether proxy advisors' facilitated coordination of investment advisors could create a "group" for purposes of Sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934, and scrutiny of whether registered investment advisors' reliance on proxy advisor recommendations on "non-pecuniary" factors is consistent with their fiduciary duties.

Outside of the securities law context, the EO directs the Federal Trade Commission, in consultation with the Attorney General, to determine whether proxy advisors are engaged in unfair methods of competition or unfair or deceptive acts or practices and to review ongoing state antitrust investigations into proxy advisors for violations of federal antitrust law. The EO also directs the Secretary of Labor to strengthen the Employee Retirement Income Security Act of 1974's fiduciary rules and increase fiduciaries' transparency regarding their use of proxy advisors.

For public companies, the near-term securities law impact is largely regulatory posture, rather than directly creating "new" rules. In other words, there does not appear to be a direct impact on this proxy season, as the EO requires the SEC to review and assess rules and regulations related to proxy advisors or enforce its existing regulations. However, the EO may have indirect impacts on this proxy season since increased scrutiny of proxy advisor analyses may intensify issuer challenges and create more friction around contested proposals and close votes, while further changes in the SEC's 14a-8 interpretive approach could change the practical calculus on proposal exclusion and negotiation. Companies should also expect closer scrutiny of investor engagement and any perception of coordinated voting (particularly in high-profile situations) and anticipate that investors will increase documentation around their proxy voting decisions and potential conflicts, especially where matters touch DEI and ESG.

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