President Donald Trump has issued an Executive Order 14366, “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors,” which could significantly impact the policies and practices of Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis), two major proxy advisory firms in the United States.
Released on December 11, 2025, the Executive Order (EO) directs the US Securities and Exchange Commission (SEC) Chairman “to review and, as appropriate, rescind or revise all rules and regulations related to proxy-advisors that implicate ‘diversity, equity and inclusion’ (DEI) and ‘environmental, social and governance’ (ESG) priorities, as well as rules related to shareholder proxy proposals that are inconsistent with the policies in the Order.”
The EO comes on the heels of ISS’s and Glass Lewis’s recent updates to their benchmark proxy voting guidelines for the 2026 proxy season, as discussed here.
Key details
The EO requires the SEC to:
- Enforce anti-fraud provisions in securities laws against proxy advisory firms in connection with their voting advice;
- Consider whether proxy advisory firms should register as investment advisors;
- Consider whether proxy advisory firms should provide increased transparency regarding conflicts of interest;
- Examine whether proxy advisory firms facilitate the coordination of voting decisions by investment advisers; and
- Assess whether registered investment advisers breach their fiduciary duties by hiring proxy advisory firms to advise on non-pecuniary factors in investing, such as DEI and ESG, and subsequently following their recommendations.
The EO also requires the Chairman of the Federal Trade Commission, in consultation with the Attorney General, to 1) determine whether proxy advisory firms are engaged in unfair methods of competition or unfair or deceptive acts or practices and 2) review ongoing state antitrust investigations into proxy advisory firms for violations of federal antitrust law.
Further, the EO directs the Secretary of Labor to strengthen rules related to fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) and increase fiduciaries’ transparency regarding the use of proxy advisory firms.
State actions focusing on proxy advisory firms
In September 2025, Texas Attorney General Ken Paxton announced the launch of an investigation against both firms for “potentially misleading institutional investors and public companies by issuing voting recommendations that advance radical political agendas rather than sound financial principles.” This followed ISS’s successful suit to block a Texas law, SB 2337, which was adopted in June 2025 and would have required the proxy advisory firms to make certain disclosures for advice related to Texas publicly traded entities, including when such advice relied wholly or in part on non-financial factors like environmental or social issues.
In addition, the State of Florida sued both ISS and Glass Lewis in November 2025, alleging that they violated “Florida’s consumer protection and antitrust laws by deceiving investors, coordinating their services, and steering corporate governance in ways disconnected from financial performance.”
SEC Commissioner views
On December 3, 2025, SEC Commissioner Mark T. Uyeda noted in a speech at the 2025 Institute for Corporate Counsel that coordinated proxy voting through proxy advisory firms (e.g., “robo-voting”) could constitute the formation of a group under Section 13(d)(3) or Section 13(g)(3) of the Securities Exchange Act of 1934 (Exchange Act), requiring investors to file beneficial ownership filings on Schedule 13D even if they individually own less than five percent beneficial ownership of a company.
It remains unclear whether Commissioner Uyeda’s remarks will deter some institutional investors from certain voting practices. Concerns over Section 13 implications for investors relying on proxy advisory firms could further discourage use of ISS’s and Glass Lewis’s services.
Prior regulation and legal challenges
The SEC issued guidance in 2019 and adopted proxy rule amendments in 2020 that sought to limit the influence of proxy advisory firms. The guidance and amendments, among other things, defined the provision of proxy advisory firm recommendations as a “solicitation” that was subject to Section 14(a) of the Exchange Act, including the anti-fraud rules, and required proxy advisory firms to meet certain requirements for exemption from the filing of solicitation materials under the SEC’s proxy rules. These requirements included disclosing conflicts of interest, allowing companies to respond to voting recommendations at or prior to the time of publication, and providing access to companies’ responses to voting recommendations. However, such regulation has stalled following legal challenges and changes in administrations.
What to expect
It remains to be seen how the institutional investors will react to these measures and whether any future attempts to regulate the proxy advisory firms or defenses of their existing policies and practices will be successful.
It is also unclear when or how the EO, any potential new regulations, or related legal challenges will impact the policies and practices of ISS or Glass Lewis. In response, the proxy advisory firms may opt to discontinue providing proxy voting advice or migrate to different product or service offerings. They may also further modify their voting recommendations with respect to topics such as diversity and ESG.
We will continue to monitor any new developments regarding the EO and related regulatory developments.
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