Trump Executive Order Targets Proxy Advisors Over ESG and DEI Influence

President Donald Trump has issued a new executive order that sharply escalates federal scrutiny of the proxy advisory industry, directing U.S. regulators to reassess how shareholder voting advice is developed, disclosed, and regulated. Signed on December 11, 2025, the order seeks to ensure that proxy voting recommendations prioritize financial returns for investors rather than what the administration characterizes as politically motivated agendas tied to environmental, social, and diversity policies. Titled Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors, the order assigns new responsibilities to the Securities and Exchange Commission, the Federal Trade Commission, and the Department of Labor. Together, these agencies are instructed to examine whether existing rules governing proxy advisors sufficiently protect investors, pension holders, and retirement savers.

 

At the center of the order are Institutional Shareholder Services and Glass Lewis, the two dominant proxy advisory firms that collectively command more than 90 percent of the U.S. market. Both firms are foreign-owned, a point repeatedly emphasized in the executive order, which argues that their market position grants them outsized influence over corporate governance decisions at America’s largest public companies. According to the administration, investment managers that rely on proxy advisors often follow their voting recommendations closely. As a result, the order claims that guidance issued by these firms can materially shape company policies on issues ranging from board composition to climate disclosures and workforce diversity. The order asserts that this influence has increasingly been used to advance ESG and DEI objectives in ways that may conflict with the financial interests of shareholders. The administration frames this dynamic as a risk to market integrity, arguing that investor confidence depends on voting advice being grounded in economic analysis rather than ideological priorities.

 

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The executive order places the SEC at the center of the regulatory response. It instructs the agency to conduct a comprehensive review of all existing rules, guidance, and staff interpretations related to proxy advisors and shareholder proposals, with a specific focus on provisions that intersect with ESG and DEI considerations. Among the areas flagged for review is Rule 14a-8, the long-standing regulation that governs shareholder proposals. The order suggests that this rule may need to be revised or withdrawn if it is found to enable the promotion of non-financial agendas through the proxy voting process. The SEC is also directed to step up enforcement of antifraud provisions where proxy voting recommendations include material misstatements or omit key information. In addition, the agency is asked to evaluate whether certain proxy advisors should be required to register as investment advisers under the Investment Advisers Act of 1940, potentially subjecting them to a higher level of fiduciary and disclosure obligations. Another focus is transparency. The order calls on the SEC to consider whether proxy advisors should be required to more clearly disclose their methodologies, conflicts of interest, and the role ESG and DEI factors play in their recommendations. The agency is further instructed to assess whether the use of proxy advisors could facilitate coordinated action among investment managers in ways that resemble group behavior under securities law.

 

The Federal Trade Commission is tasked with examining the competitive dynamics of the proxy advisory industry. The order directs the FTC to review ongoing state-level investigations into proxy advisors and assess whether the conduct under scrutiny may violate federal antitrust laws. Beyond coordination with state probes, the FTC is instructed to independently investigate whether proxy advisors engage in unfair or deceptive practices. This includes examining whether conflicts of interest are adequately disclosed, whether information provided to investors is misleading, and whether market dominance is being used in ways that disadvantage investors or suppress competition. The administration’s framing positions proxy advisory services not merely as governance intermediaries but as market actors whose conduct may have consumer protection and competition implications.

 

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The Department of Labor is directed to reassess how proxy voting advice is treated under the Employee Retirement Income Security Act, which governs private-sector pension and retirement plans. The order instructs the Secretary of Labor to review and revise existing guidance on fiduciary responsibilities related to proxy voting. A key objective is clarifying whether proxy advisors themselves should be considered fiduciaries when advising on votes connected to ERISA-covered plans. The order also calls for stronger fiduciary standards to ensure that voting decisions affecting retirement assets are made solely in the financial interests of plan beneficiaries. Transparency is again emphasized, with the Department of Labor directed to take steps that shed more light on how pension managers use proxy advisors, particularly when voting guidance incorporates ESG or DEI considerations.

 

The executive order was welcomed by senior Republican lawmakers overseeing financial services policy. House Financial Services Committee Chair French Hill and Capital Markets Subcommittee Chair Ann Wagner praised the action as a long-overdue effort to rebalance corporate governance and protect investors. In a joint statement, they argued that a small number of firms have wielded disproportionate influence over decisions affecting millions of shareholders. They said the reforms would help ensure that shareholder voting is informed, transparent, and aligned with value creation, strengthening confidence in U.S. capital markets. The order represents the most direct federal intervention to date in the proxy advisory ecosystem as part of the broader U.S. pushback against ESG and DEI policies. By involving multiple regulators and explicitly questioning whether sustainability-related voting advice aligns with fiduciary duties, the administration is signaling a shift toward tighter oversight and potential structural change. For asset managers, proxy advisors, and public companies, the order introduces a new layer of regulatory uncertainty. How aggressively agencies act, and whether rules are ultimately revised or rescinded, could reshape the mechanics of shareholder engagement and corporate governance in the years ahead.

 

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