President Trump Targets DEI and ESG Policies of Proxy Advisors in Executive Order

On December 11, 2025, President Donald Trump issued an Executive Order mandating a number of regulatory actions aimed at curtailing the influence of proxy advisors over U.S. public companies, particularly their influence over diversity, equity, and inclusion (“DEI”), and environmental, social, and governance (“ESG”) matters, which the Order refers to as “radical politically-motivated agendas” advanced and prioritized by proxy advisors over investor returns. The Order appears targeted at two prominent proxy advisors, Institutional Shareholder Services, and Glass Lewis, who are the only proxy advisors specifically referred to in the Order. The Order asserts that both firms “play a significant role in shaping the policies and priorities of America’s largest companies through the shareholder voting process” and “control more than 90 percent of the proxy advisor market” and states that the United States must “increase oversight of and take action to restore public confidence in the proxy advisory industry.” While the Order also includes directives for the Federal Trade Commission (“FTC”) and the Department of Labor, its most immediate market implications stem from directives to the Securities and Exchange Commission (“SEC”).

We summarize the Order’s directives below.

Directives to the SEC

The Order directs the SEC Chair to:

• Review and consider revising or rescinding all SEC “rules, regulations, guidance, bulletins, and memoranda relating to proxy advisors,” especially where they implicate ESG or DEI;
• Consider revising or rescinding rules and guidance on shareholder proposals, specifically including Rule 14a‑8 under the Securities Exchange Act of 1934 (“Exchange Act”), the SEC’s shareholder proposal rule, where inconsistent with the Order’s purpose;
  • This directive aligns with the SEC Chair’s Spring 2025 rulemaking agenda, which envisages modernization of the shareholder proposal regime, as well as the SEC Chair’s recent speeches.
• Enforce the federal securities laws’ anti‑fraud provisions with respect to material misstatements or omissions in proxy advisors’ recommendations;
• Assess whether proxy advisors should be required to register as investment advisers;
• Consider requiring increased transparency from proxy advisors regarding their recommendations, methodologies, and conflicts of interest, with specific focus on ESG/DEI factors;
• Analyze whether proxy advisors facilitate coordination of voting decisions among investment advisers sufficient to form a “group” for purposes of beneficial share ownership reporting requirements under Sections 13(d)(3) and 13(g)(3) of the Exchange Act; and
• Direct SEC staff to examine whether investment advisers’ engagement of proxy advisors to advise on non‑pecuniary factors in investing (including ESG/DEI) is inconsistent with their fiduciary duties.

Other Directives

As regards the FTC, the Order directs the FTC Chair, in consultation with the Attorney General, to investigate whether any federal liability arises from conduct underlying certain state antitrust investigations into proxy advisors, and whether proxy advisors engage in unfair methods of competition or unfair or deceptive acts or practices that harm consumers, including by failing to adequately disclose conflicts of interest and undermining consumers’ ability to make informed choices.

The Order also tasks the Secretary of Labor with revising all regulations and guidance regarding the fiduciary status of proxy advisors in relation to proxy voting and other rights of shares of plans covered by the Employee Retirement Income Security Act of 1974 (“ERISA plans”), specifically whether a proxy advisor is an investment advice fiduciary under ERISA. The Secretary of Labor has also been directed to assess whether proxy advisors act solely in the financial interests of ERISA plans.