Trump Signs Executive Order Targeting ‘Politically-Motivated’ Proxy Advisers 

President Donald Trump signed an executive order on Thursday aimed at curbing what he described as the “outsized influence” of proxy advisory firms that “prioritize radical political agendas” ahead of financial returns for American investors and retirees. 

Curbing Proxy Adviser Power 

The order directed the Securities and Exchange Commission to review and potentially rescind regulations related to proxy advisers or their proposals that include diversity, equity and inclusion considerations or environmental, social and governance factors. 

The SEC was also instructed: 

• to enforce anti-fraud provisions against proxy advisers’ voting recommendations; 

• to consider requiring proxy advisers to register as investment advisers; 

• to increase transparency related to conflicts of interest; 

• to examine whether these firms coordinate voting among institutional investors; and 

• to assess whether investment advisers breach fiduciary duties when relying on proxy firms’ non-financial guidance.

The Federal Trade Commission, in consultation with the attorney general, was instructed to determine whether proxy advisers engage in unfair or deceptive practices, including potential violations of federal antitrust laws.

The order further tasked the Department of Labor with strengthening fiduciary standards under the Employee Retirement Income Security Act, which are already considered among the strictest under U.S. law, to ensure that pension fund managers and proxy advisers act solely in the financial interests of American workers and retirees, according to a White House fact sheet.

 
Industry Reactions

Lisa Gomez, president of LMG Collaborative Consulting Solutions and former assistant secretary of Labor for the Employee Benefits Security Administration under President Joe Biden, says the executive order raises familiar fiduciary questions under ERISA.

“When you get past the political rhetoric, I think we can all agree that keeping politics away from America’s retirement accounts is a worthy goal,” Gomez says. “But the DOL will have a hard time finding a way to require that individuals who ‘advise those who manage’ plan assets be held to a fiduciary standard if they are not exercising discretion over plan assets.”

Brad Campbell, a partner in Faegre Drinker Biddle & Reath LLP and former head of EBSA under former President George W. Bush, said the move was expected.

“The new executive order on proxy voting is not surprising—in the first term, the Trump administration issued new regulations addressing ERISA fiduciary obligations related to proxy voting and shareholder activism,” Campbell says. “Even before this executive order, DOL had indicated it would revise the current rule to ensure plan fiduciaries select investments and exercise shareholder rights based only on financial considerations.”

Tim Rouse, executive director of the SPARK [Society of Professional Asset Managers and Recordkeepers] Institute, says his group will be closely following how the DOL implements the order. He clarified how proxy voting typically functions within defined contribution plans.

“In the 401(k) world, proxy voting decisions are made by the plan fiduciary—usually the employer or an appointed investment manager—not by the recordkeeper,” Rouse explained. “Recordkeepers handle the mechanics, but they don’t decide how shares are voted.”

Targeting Specific Firms 

In the fact sheet accompanying the order, the White House accused two major proxy advisory firms, Institutional Shareholder Services Inc. and Glass, Lewis & Co.—which it stated make up more than 90% of the proxy advisory market—of using their market dominance to push “radical leftist policies” on U.S. corporations. ISS STOXX is the parent company of both Institutional Shareholder Services and PLANSPONSOR. 

An ISS spokesperson said it is aware of the executive order addressing proxy advisory firms and reviewing it carefully. 

“ISS is an SEC-registered investment adviser that for more than four decades has provided independent research and vote recommendations informed by extensive client and stakeholder engagement,” the spokesperson said. “Our clients are sophisticated institutional investors, who determine how they wish to vote by selecting from a range of voting policies that guide our work on their behalf, or by creating customized policies for advice tailored to their own particular needs. ISS does not dictate or set corporate governance standards and remains firmly committed to operating professionally, ethically, independently and in the best interests of our clients, as we have done historically.” 

Glass Lewis did not respond to a request for comment. 

The Trump administration contends that the firms’ influence has led to reduced returns and diminished trust among investors. 

“Conflicts of interest, lack of transparency, and one-size-fits-all voting policies have eroded trust and hurt the value of retirement savings for everyday Americans,” the White House stated. 

The White House fact sheet prominently identified both companies as foreign-owned. Glass Lewis is based in San Francisco and owned by Canadian private equity firm Peloton Capital Management, which bought the company in 2021 from two Canadian pension funds. The Institutional Shareholder Services business is based in the U.S. Germany’s Deutsche Börse is the majority owner in the current parent company, ISS STOXX.  

A Broader Battle Over ESG Investing 

The order marks the latest salvo in an ongoing political battle over ESG investing and the latest effort by the administration to root out DEI in government and elsewhere. Conservatives have increasingly criticized both ESG investing and DEI practices as advancing progressive goals at the expense of financial returns. 

Earlier this year, Trump’s DOL said it would craft a new ESG retirement investing rule to replace a rule published under former President Joe Biden that permitted the consideration of ESG factors when deciding between otherwise equal investment options for defined contribution plan investment menus. 

“This bold directive will benefit millions of American workers and retirees who have unknowingly had their investment decisions hijacked by foreign actors with misguided motivations,” said Secretary of Labor Lori Chavez-DeRemer in a statement. “The Labor Department stands ready to carry out the President’s directive, and we will continue fighting to secure the hard-earned capital of American workers.”