Fact Sheet: President Donald J. Trump Protects American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors

President Trump signed an executive order directing the SEC, FTC (in consultation with the Attorney General), and the Labor Department to review and potentially rescind or revise rules governing proxy advisors—including orders to consider requiring registration as investment advisers, enforce anti‑fraud provisions, increase disclosure of conflicts, and tighten ERISA fiduciary duties—targeting large foreign‑owned firms (the fact sheet cites ISS and Glass Lewis as controlling over 90% of the market) that it says promote DEI/ESG recommendations. The action opens the door to antitrust scrutiny, greater regulatory and litigation risk for proxy vendors and asset managers, and potential limits on non‑pecuniary ESG/DEI influence in shareholder voting, which could materially alter proxy‑voting dynamics, corporate governance outcomes and compliance costs for pension plans, 401(k) providers and public companies.

Analysis

President Trump signed an Executive Order directing the SEC, FTC (in consultation with the Attorney General), and the Secretary of Labor to review and potentially rescind or revise rules governing proxy advisors. The Order targets recommendations tied to DEI and ESG priorities and instructs the SEC to consider requiring proxy advisors to register as investment advisers, enforce anti‑fraud provisions, increase conflict disclosures, and assess ERISA fiduciary breaches. The fact sheet explicitly names Institutional Shareholder Services and Glass Lewis as foreign‑owned firms that together control more than 90% of the proxy advisory market.

The Order elevates antitrust and fiduciary scrutiny by directing the FTC to evaluate unfair competition and the Labor Department to tighten ERISA fiduciary rules and transparency for 401(k)s and pensions, creating heightened regulatory and litigation risk for proxy vendors and asset managers. Administration framing that these recommendations have prioritized ideological goals over returns implies a likely policy shift constraining non‑pecuniary ESG/DEI influence on shareholder voting. Signals in the package show moderately positive market sentiment (0.45) and similar market impact, suggesting investors perceive potential benefit to return‑focused strategies.

Near term, expect increased compliance costs for asset managers, shifts in proxy‑voting dynamics and shareholder proposal outcomes, and a period of legal and regulatory uncertainty while rulemakings and state antitrust probes proceed. Public companies, pension plans and 401(k) providers should prepare to recalibrate governance engagement, documentation and disclosure practices as the regulatory landscape evolves.

Key Decisions for Investors

• Re-evaluate direct and indirect exposure to proxy‑advisor firms and vendors tied to ISS and Glass Lewis and consider hedges or reducing vendor concentration given heightened regulatory and antitrust risk
• Asset managers and pension fiduciaries should prepare to internalize proxy‑voting governance, document independent analysis of recommendations, and budget for higher compliance costs rather than relying solely on third‑party voting templates
• Corporate investors and issuers should anticipate changes in shareholder proposal success rates and proactively update governance disclosures and engagement strategies to influence outcomes under a shifted proxy advisory regime
• Monitor SEC, FTC, Labor Department rulemaking, state antitrust probes and any litigation milestones as near‑term catalyst events and be ready to adjust positions on regulatory announcements or legal decisions