Trump Orders Crackdown on Proxy Advisors for Supporting ESG, DEI

President Trump issued an executive order directing the SEC, FTC and Labor Department to increase oversight of proxy advisers Glass Lewis and ISS—which he says control more than 90% of the market and are “foreign-owned” after 2021 acquisitions—ordering probes into potential antitrust, unfair competition and deceptive-practices related to their support for ESG and DEI shareholder proposals. The SEC is asked to consider requiring the firms to register as RIAs, boost transparency around ESG/DEI recommendations and examine potential fiduciary conflicts, the FTC to assess links to state investigations and antitrust violations, and the Labor Department to revise ERISA-related rules on use of proxy advice, all part of a broader GOP crackdown on ESG that has included state lawsuits and regulatory warnings. ISS responded that it is SEC-registered, provides client-directed voting research and recommendations, and is reviewing the order; if implemented, the measures could materially expand regulator control over proxy-advice practices and alter how institutional investors use external voting guidance.

Analysis

President Trump issued an executive order directing the SEC, FTC and Department of Labor to increase oversight of proxy advisers Glass Lewis and Institutional Shareholder Services (ISS), which the order states account for more than 90% of the proxy advisory market after 2021 acquisitions (Glass Lewis by Peloton Capital and Chairman Stephen Smith; ISS by Deutsche Börse). The order specifically accuses the firms of advancing politically motivated ESG and DEI agendas and cites examples such as support for shareholder proposals to reduce greenhouse gas emissions and to conduct racial equity audits.

The SEC is tasked to consider requiring these firms to register as Registered Investment Advisers (RIAs), to boost transparency on ESG/DEI recommendations and to examine whether use of their advice is inconsistent with fiduciary duties; the FTC must review state investigations for probable antitrust or unfair-competition links and the Labor Department is to revise ERISA rules governing pension managers’ use of proxy advice. The action follows recent state lawsuits (Florida, Texas) and public comments from SEC figures signaling heightened regulatory focus.

ISS has responded that it is SEC-registered and provides client-directed research and voting recommendations, framing a factual counterpoint to claims of unregulated influence. Implementation of the order could materially expand regulator control over proxy-advice practices, increasing compliance costs and business-model risk for Glass Lewis and ISS and creating near-term uncertainty for asset managers and corporates that rely on third-party voting guidance.

Key Decisions for Investors

• Monitor SEC rulemaking and FTC/Labor reviews closely over the coming quarters and avoid initiating new long exposure to vendors or service providers materially dependent on proxy-advisory revenues until regulatory outcomes are clearer
• Asset managers and pension fiduciaries should immediately audit and document reliance on external voting recommendations, review fiduciary policies, and consider building or contracting alternative in‑house voting infrastructure to mitigate operational and compliance risk
• Corporate investors and issuers should increase proactive engagement on ESG/DEI proposals, prepare communications and governance contingency plans for altered proxy-advice dynamics, and consider reducing governance-sensitive position size or using short-dated hedges while uncertainty persists