The White House has issued an Executive Order directing federal agencies to review the proxy advisor industry, including proxy voting practices and the use of DEI and ESG considerations. Our Securities Group discusses what companies and shareholders should watch as agencies begin implementing the Order.
- Federal agencies are directed to review oversight of proxy advisors
- Proxy voting practices involving DEI and ESG may face increased scrutiny
- Any changes to proxy voting regulations depend on subsequent agency action, not the Order itself
On December 11, 2025, the White House issued an Executive Order, Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors, aimed at increasing federal oversight of the proxy advisor industry, with particular attention to practices related to diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) issues.
While addressing the White House’s concerns about the proxy advisor industry at large, the Order specifically names and targets two leading firms, Glass Lewis and Institutional Shareholder Services (ISS), which the Order states “control more than 90 percent of the proxy advisor market.” It asserts that these firms use their influence to advance agendas such as DEI and ESG, which, according to the Order, may not align with the sole priority of investor returns. The Order directs the Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), and Department of Labor (DOL) to take actions intended to promote accountability, transparency, and competition.
Key Directives
The Order demands action from various federal actors, including the SEC, FTC, and DOL. Both the SEC chairman and Secretary of Labor are specifically directed to review and revise regulations and practices relating to DEI and ESG.
SEC. The SEC chairman is directed to assess whether proxy advisors generally should register under the Investment Advisers Act of 1940, subjecting them to additional regulation, and consider how investment advisers may use a proxy advisor to coordinate their voting decisions. The Order also instructs the SEC to examine whether following proxy advisors’ recommendations based on nonpecuniary factors, such as DEI or ESG, aligns with registered investment advisers’ fiduciary duties.
The chairman is further instructed to review and, if necessary, revise or rescind rules and guidance related to shareholder proposals, including Rule 14a-8, to ensure consistency with the Order’s objectives. Rule 14a-8 governs how shareholders submit and companies address shareholder proposals.
Department of Labor. The DOL is instructed to review and update regulations on fiduciary responsibilities under ERISA-covered plans, including proxy voting and corporate engagement, to align with the Order’s objectives. The DOL is also directed to enhance transparency of proxy advisor use, particularly for DEI and ESG practices.
FTC. The FTC is directed to investigate whether proxy advisors engage in anticompetitive, unfair, or deceptive practices, and to consult with the Attorney General on potential links between state antitrust investigations and federal law violations.
Takeaways
While the Order does not specify timelines for federal action, the SEC has indicated an interest in prompt regulatory review. As the upcoming proxy season approaches, companies and shareholders should monitor potential changes in industry practices.
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