On December 12, 2025, President Donald J. Trump signed an Executive Order aimed at limiting the influence of proxy advisors that may prioritize political agendas over investor returns. This Order requires a review of existing regulations concerning proxy advisors, particularly their recommendations on environmental, social, and governance (ESG) factors, as well as diversity, equity, and inclusion (DEI) initiatives. It directs the Securities and Exchange Commission (SEC) and other regulatory bodies to ensure compliance with fiduciary duties and maintain transparency regarding conflicts of interest.
The Executive Order addresses concerns regarding foreign-owned proxy advisors, especially Institutional Shareholder Services and Glass Lewis, which are perceived to exert substantial influence over U.S. companies by advancing politically motivated proposals that could undermine financial returns. Critics contend that the recommendations made by these firms on shareholder matters, like board composition and executive compensation, are frequently accepted without thorough independent review, potentially harming the interests of U.S. investors. In response, the Order proposes measures to enhance accountability for proxy advisors, such as potential registration as investment advisers and increased scrutiny of their operations.
Furthermore, the Order highlights the necessity of safeguarding American investors’ retirement savings, calling upon the Federal Trade Commission (FTC) and the Department of Labor to improve transparency and accountability in the practices of proxy advisors. By reinforcing fiduciary standards and reducing foreign influence in domestic investment choices, the Trump administration aims to create a more secure financial environment for American workers and retirees. The primary objective is to ensure investments prioritize maximizing financial returns rather than pursuing politically motivated goals.
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