White House Issues Executive Order on Proxy Advisory Firm Oversight

On December 11, 2025, President Trump issued an Executive Order titled “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors” (the “Order”), which directs the Securities and Exchange Commission (“SEC”), Federal Trade Commission (“FTC”), and Department of Labor (“DOL”) to take significant steps aimed at increasing oversight of Institutional Shareholder Services Inc. (“ISS”) and Glass, Lewis & Co., LLC (“Glass Lewis”). ISS and Glass Lewis collectively control more than 90% of the U.S. proxy advisory market.

The Order asserts that proxy advisors exert “enormous influence” over corporate governance matters across America’s largest companies, 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. Claiming that the U.S. must “increase oversight of and take action to restore public confidence in the proxy advisor industry, including by promoting accountability, transparency, and competition,” the Order directs federal agencies to investigate and consider new rules regulating proxy advisory firms as discussed below.

If implemented, the directives and any resulting rule changes could have far-reaching implications for public companies, investment advisers, registered fund families, ERISA plan fiduciaries, and the proxy advisory firms whose recommendations shape voting outcomes.

SEC Directed to Review and Consider Changes to Proxy Advisor and Shareholder Proposal Rules

The Order directs the SEC Chairman, consistent with the Administrative Procedure Act (“APA”), to undertake a broad review of all rules, regulations, guidance, bulletins, and memoranda applicable to proxy advisors. In particular, the SEC is instructed to:

• Reevaluate and potentially revise or rescind rules that the Order characterizes as enabling consideration of ESG/DEI factors in proxy voting.
• Consider revising or rescinding all rules, regulations, guidance, bulletins, and memoranda relating to shareholder proposals, including Rule 14a-8, that are inconsistent with the purpose of the Order.

The Order further directs the SEC Chairman to:

• Enforce federal securities laws where proxy advisor recommendations contain alleged material misstatements or omissions.
• Assess whether proxy advisors should be required to register as investment advisers under the Investment Advisers Act of 1940.
• Consider imposing enhanced disclosure obligations requiring proxy advisors to detail their voting recommendations, analytical methodologies and conflicts of interest, particularly where ESG/DEI factors play a role.
• Analyze whether investment advisers may be forming “groups” by coordinating voting decisions with proxy advisors, which could trigger Sections 13(d) and 13(g) beneficial-ownership reporting requirements and related disclosure obligations.
• Examine whether registered investment advisers act consistently with their fiduciary duties when they engage proxy advisors and follow such proxy advisors’ recommendations that rely on non-pecuniary factors, including DEI and ESG considerations.

It is difficult to predict what form potential changes could take resulting from this review and there are no firm timelines or directives for the SEC to act upon. Nevertheless, it stands to reason that actions consistent with the Order will be a high priority for the SEC moving forward.

FTC and Antitrust Focus: Investigation of Potential Anticompetitive Conduct

The Order also instructs the Chairman of the FTC, in consultation with the DOJ, to:

• Review ongoing state antitrust investigations into proxy advisors to determine whether there is a probable link to federal antitrust violations.
• Investigate whether proxy advisors engage in unfair methods of competition or unfair/deceptive acts, including by:
• Conspiring or colluding in ways that may reduce the value of consumer investments;
• Failing to adequately disclose conflicts of interest;
• Providing misleading or inaccurate information;
• Impeding investors' ability to make informed decisions; or
• Otherwise violating federal antitrust laws or Section 5 of the Federal Trade Commission Act or the Sherman Antitrust Act.

The focus on potential collusion and coordinated conduct aligns with broader enforcement trends and may prompt closer examination of how proxy advisors develop and disseminate their recommendations.

DOL Directive: Reframing Proxy Voting Under ERISA

The Order directs the Secretary of Labor to take steps, consistent with the APA, to revise regulations and guidance addressing proxy voting and corporate engagement by ERISA plans. Specifically, the DOL is asked to:

• Revise regulations and guidance, consistent with the Order, concerning the fiduciary status of those who manage or advise on proxy voting and other shareholder rights for ERISA plans.
• Strengthen fiduciary standards under ERISA by assessing whether proxy advisors act solely in the financial interests of plan participants and whether any of their practices undermine the pecuniary value of plan assets.
• Enhance transparency regarding ERISA fiduciaries’ use of proxy advisors, particularly when ESG/DEI factors influence recommendations.

This could represent a shift toward more stringent fiduciary standards following the DOL’s 2021 and 2022 rulemakings that permitted greater ERISA plan consideration of ESG factors.

Key Implications for Market Participants

• Public Companies: Companies may experience changes in voting patterns and changes to engagement and communication with proxy advisors.
• Investment Advisers and Asset Managers: Firms should prepare for potential new requirements regarding reliance on proxy advisors, conflicts management, methodology transparency, and fiduciary considerations when ESG/DEI factors inform voting decisions.
• Proxy Advisory Firms: ISS, Glass Lewis, and other proxy advisors face potential rulemaking that could materially alter their operating and compliance frameworks, including a possible requirement to register as investment advisers and assume expanded liability exposure.
• ERISA Plan Fiduciaries: Plans and managers may need to reassess proxy voting policies and strengthen documentation demonstrating that voting decisions are grounded in participants’ financial interests.
• Antitrust Compliance: The directive for the FTC to review ongoing state antitrust investigations and potentially conduct its own investigations raises the prospect of active enforcement of proxy advisors.

Looking Ahead

While the Order itself does not change existing law, it directs agencies to begin processes that could result in substantial changes to proxy voting, shareholder proposal frameworks, and the regulatory expectations of investment advisers and ERISA fiduciaries. The SEC, DOL, and FTC may revisit, and potentially reverse, long-standing regulatory positions, impose new disclosure and oversight obligations, and increase scrutiny of ESG- and DEI-related voting rationales.

Many of the contemplated actions would require formal rulemaking under the APA, and therefore could be subject to public comment, legal challenges, and significant lead time before implementation. Nonetheless, the Order signals clear agency priorities, and proxy advisory firms, as well as the investment advisers, public companies, and fund families that rely on or are affected by their recommendations, should anticipate increased regulatory attention to their proxy-related practices.

We will continue to monitor agency actions taken in response to the Order and provide updates as rule proposals, enforcement initiatives, and interpretive guidance emerge.