Washington, Dec 12, 2025
Asserting that two foreign-owned firms exert outsized influence over corporate governance in the United States, President Donald Trump signed an executive order directing sweeping regulatory and enforcement reviews of the proxy advisory industry.
The order, titled Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors, focuses on Institutional Shareholder Services Inc. and Glass, Lewis & Co., LLC, which it says “control more than 90 percent of the proxy advisor market” and play “a significant role in shaping the policies and priorities of America’s largest companies through the shareholder voting process.”
“Unbeknownst to many Americans,” the order states, these firms advise clients on how to vote “the enormous numbers of shares their clients hold and manage on behalf of millions of Americans in mutual funds and exchange traded funds,” with clients’ holdings often constituting “a significant ownership stake in the United States’ largest publicly traded companies.” Their clients, it adds, “often follow the proxy advisors’ advice.”
As a result, the order says, proxy advisors “wield enormous influence over corporate governance matters, including shareholder proposals, board composition, and executive compensation,” as well as over “capital markets and the value of Americans’ investments more generally, including 401(k)s, IRAs, and other retirement investment vehicles.”
The executive order signed by Trump accuses the firms of using that influence 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.”
It cites support for shareholder proposals requiring companies to conduct “racial equity audits” and “significantly reduce greenhouse gas emissions,” and notes that one firm “continues to provide guidance based on the racial or ethnic diversity of corporate boards.”
The order also raises “significant concerns about conflicts of interest and the quality of their recommendations,” concluding that the United States “must therefore increase oversight of and take action to restore public confidence in the proxy advisor industry, including by promoting accountability, transparency, and competition.”
As such, Trump directs the Chairman of the Securities and Exchange Commission to review “all rules, regulations, guidance, bulletins, and memoranda relating to proxy advisors” and consider revising or rescinding those “inconsistent with the purpose of this order,” particularly where they implicate “diversity, equity, and inclusion” and “environmental, social, and governance” policies.
The SEC is also asked to consider changes to shareholder proposal rules, including Rule 14a-8, and to enforce federal securities laws’ anti-fraud provisions for “material misstatements or omissions contained in proxy advisors’ proxy voting recommendations.”
It instructs the Federal Trade Commission, in consultation with the Attorney General, to review ongoing state antitrust investigations and to investigate whether proxy advisors engage in “unfair methods of competition or unfair or deceptive acts or practices” that harm US consumers, including by “failing to adequately disclose conflicts of interest” or “providing misleading or inaccurate information.”
Further, the Department of Labor is directed to review and potentially revise guidance under the Employee Retirement Income Security Act, including whether proxy advisors should be treated as fiduciaries and whether they act “solely in the financial interests of plan participants,” with a mandate to enhance transparency around the use of proxy advisors in pension and retirement plans.
Proxy advisory firms play a central role in global capital markets, including for large US-listed companies with significant foreign ownership and international investor participation.
Their recommendations are closely watched by institutional investors worldwide, including those with exposure to US equities from emerging markets such as India.(Agency)
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