On December 11, President Trump signed an Executive Order titled “Protecting American Investors from Foreign‑Owned and Politically‑Motivated Proxy Advisors” (the “Order”). The Order focuses on the “enormous influence” of proxy advisory firms, particularly Institutional Shareholder Services, Inc. (“ISS”) and Glass, Lewis & Co. LLC (“Glass Lewis”). According to the Order, the two firms control more than 90 percent of the proxy advisor market and “regularly use their substantial power to advance and prioritize radical politically-motivated agendas — like ‘diversity, equity, and inclusion’ [(“DEI”)] and ‘environmental, social, and governance’ [(“ESG”)] — even though investor returns should be the only priority.” The Order directs the Securities and Exchange Commission (“SEC”) and other agencies to “increase oversight of and take actions to restore public confidence in the proxy advisor industry, including by promoting accountability, transparency, and competition.” In addition to proxy advisory firms, the Order also contains provisions related to asset managers and shareholder proposals. Key elements of the Order are summarized below.
With respect to the SEC, the Order:
- Directs the SEC Chairman to review all rules, regulations, guidance, bulletins and memoranda relating to proxy advisors and to shareholder proxy proposals, including Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”),[1] and to consider revising or rescinding those that are inconsistent with the purpose of the Order.
- Further, it orders the SEC Chairman to
- enforce the anti-fraud provisions of federal securities laws with respect to “material misstatements or omissions” in the voting recommendations issued by proxy advisors;
- assess whether proxy advisors must register as investment advisers registered under the Investment Advisers Act of 1940 (“Registered Advisers”);
- consider requiring additional disclosures from proxy advisors about their recommendations, methodology, and conflicts of interest, especially regarding DEI and ESG issues;
- analyze whether and under what circumstances proxy advisors may serve as coordinating mechanisms for “groups” within the meaning of 13(d)(3) and 13(g)(3) of the Exchange Act; and
- examine whether it is inconsistent with the fiduciary duties of Registered Advisers to engage proxy advisors to advise on (and follow the recommendations of such proxy advisors with respect to) “non-pecuniary factors in investing, including, as appropriate, [DEI] and [ESG] factors.”
With respect to the Federal Trade Commission (“FTC”), the Order:
- Directs the FTC Chairman, in consultation with the Attorney General, to review ongoing state antitrust investigations into proxy advisors and “determine if there is a probable link between conduct underlying those investigations and violations of Federal antitrust law.”
- Specifically orders the FTC Chairman, in consultation with the Attorney General, to investigate whether proxy advisors engage in unfair methods of competition or unfair or deceptive acts or practices that harm United States consumers by (i) conspiring or colluding, explicitly or implicitly, to diminish the value of consumer investments (including pensions and retirement accounts); (ii) failing to adequately disclose conflicts of interest; (iii) providing misleading or inaccurate information; (iv) undermining the ability of consumers to make informed choices; or (v) otherwise engaging in conduct that violates the federal antitrust laws.
With respect to the Department of Labor, the Order:
- Instructs the Secretary of Labor to consider revising the regulations and guidance regarding individuals who manage (or, like proxy advisory firms, advise those who manage) plans under the Employee Retirement Income Security Act of 1974 (“ERISA”) “to specify that any individual who has a relationship of trust and confidence with their client, including any proxy advisor, and who provides advice for a fee or other compensation, direct or indirect, with respect to the exercise of the rights appurtenant to shares held by ERISA plans, is an investment advice fiduciary under ERISA.”
- Instructs the Secretary of Labor to revise all regulations and guidance regarding the fiduciary status of individuals who manage ERISA plans, including the rights ERISA fiduciaries exercise with respect to proxy votes and corporate engagement, consistent with the Order. The Order directs the Secretary of Labor to “take all appropriate action to strengthen the fiduciary standards of pension and retirement plans covered under ERISA,” including assessing whether proxy advisors act “solely in the financial interests of plan participants and the extent to which any of their practices undermine the pecuniary value of the assets of ERISA plans.” In addition, the Secretary of Labor must take all appropriate action to “enhance [fiduciaries’] transparency concerning the use of proxy advisors,” particularly regarding DEI and ESG investment practices.
Implications
The Order reflects the Trump administration’s ongoing focus on proxy advisory firms and their impact on shareholder votes on matters at public companies. The Order emphasizes a focus on financial returns as the ultimate purpose of corporate governance, as well as the fiduciary duties of Registered Advisers and ERISA fiduciaries.
The full impact of the Order across the proxy ecosystem will depend on how the SEC, FTC, Department of Labor and other agencies interpret and implement its policy directives. As of the date of the Order, the FTC has already confirmed[2] that it has launched an investigation into ISS and Glass Lewis. In a November 2025 interview,[3] SEC Chairman Paul Atkins also stated that the SEC is focused on the influence of proxy advisory firms in the area of corporate governance, and intends to examine the “entire area” within “the next year,” including any actions by institutional investors and money managers who position themselves in the marketplace and with the SEC as passive investors to influence management of the companies in which they invest.
Companies should monitor the federal government’s actions implementing the Order, as well as state-level regulatory activity impacting these areas.[4] It also remains to be seen how proxy advisory firms and asset managers, some of which have already announced changes to their business models, will continue to evolve their business practices to respond to the Order and subsequent developments. For many companies, these actions could create meaningful changes to proxy season engagement practices and results in the coming years.
ENDNOTES
[1] The SEC has indicated that it is focused on potential reforms to Rule 14a-8. The SEC’s latest Regulatory Agenda, published on September 4, 2025, listed “Shareholder Proposal Modernization” among the rule proposals slated for a notice of proposed rulemaking in April 2026. On October 9, 2025, SEC Chairman Paul Atkins also highlighted paths that companies may take to exclude shareholder proposals that may be improper under state law. For additional information, see our publications entitled “SEC Announces Spring 2025 Agenda” and “SEC Chair Highlights Paths for Companies to Exclude Shareholder Proposals.”
[2] Jack Pitcher & Dave Michaels, Proxy Advisers ISS and Glass Lewis Are Facing Antitrust Probes, Wall Street Journal (November 12, 2025), https://www.wsj.com/finance/regulation/proxy-advisers-iss-and-glass-lewis-are-facing-antitrust-probes-22f0ff38.
[3] Paul Atkins, New rules could shake up corporate America as White House moves to curb shareholder power, Fox Business(November 14, 2025), https://www.foxbusiness.com/video/6385104260112.
[4] For example, Texas recently adopted a law to regulate proxy advisory firms in their voting recommendations concerning Texas companies. See our publication entitled “Summary of Recent Changes to Delaware, Nevada, and Texas Corporate Law.”
This post is based on the Sullivan & Cromwell LLP memorandum, “President Trump Issues Executive Order on Proxy Advisors and Shareholder Proposals,” dated December 12, 2025, and available here.