In a move certain to reverberate across companies, boards and investors alike, the White House issued a bombshell Executive Order today that puts the Securities and Exchange Commission Chair squarely in control of proxy advisory influence—especially where DEI, ESG priorities, and politically tinged shareholder proposals are concerned.
President Trump’s Order aims to curtail the sway of “foreign-owned and politically motivated” proxy advisory firms that critics argue have been using Americans’ retirement savings—think 401(k)s, IRAs, and pensions—to press what the administration describes as “leftist policies” on U.S. companies. The overarching message: corporate governance should be centered on returns, retirement security, and wealth-building for all Americans—not ideology.
Here’s what the Order directs:
SEC Gets a Proxy Power Shift
The Order charges the SEC Chair with a comprehensive review and potential overhaul of all rules and regulations governing proxy advisors. That includes anything tied to DEI or ESG priorities, as well as shareholder proposals deemed inconsistent with the administration’s economic focus.
Under these new directives, the SEC must consider:
- Using anti-fraud provisions of securities laws to take action against proxy advisors’ voting recommendations
- Requiring proxy advisors to register as investment advisers, increasing regulatory oversight
- Mandating greater transparency around conflicts of interest
- Examining whether proxy advisor guidance is effectively coordinating voting decisions among investment advisers
- Assessing potential breaches of fiduciary duty when registered investment advisers use proxy advisors to prioritize non-pecuniary factors like DEI/ESG
2. FTC to Probe Competitive Practices
The Order directs the FTC, in working with the Attorney General, to determine whether proxy advisors are engaging in unfair methods of competition or deceptive practices and to review state antitrust investigations into potential violations of federal law.
3. Department of Labor To Tighten Fiduciary Rules
Finally, the Secretary of Labor is tasked with strengthening fiduciary standards under ERISA. That includes requiring greater transparency about how proxy advisors are used by plan managers—and ensuring decisions are based strictly on the financial interests of American workers and retirees rather than social agendas.
The Bottom Line: This is likely the beginning of a major shift in how proxy advisors are regulated—and how shareholder voices are weighed in corporate governance.
