President Trump has issued an Executive Order focused on strengthening protections for American investors against the influence of foreign-owned proxy advisory firms. These firms have been identified by the Administration as exerting significant influence over corporate governance decisions, including shareholder proposals and executive compensation. The Administration raises concerns that their recommendations often prioritize politically driven agendas, such as diversity, equity, inclusion, and environmental policies, rather than focusing solely on financial returns for investors.
The order directs the Securities and Exchange Commission (SEC) to review existing rules and guidance related to proxy advisors and shareholder proposals. This review includes considering revisions to ensure alignment with the order’s purpose, enforcing anti-fraud provisions, and increasing transparency regarding methodologies and potential conflicts of interest. The SEC will also assess whether proxy advisors should register as investment advisers and examine practices that may conflict with fiduciary duties when non-financial factors influence voting recommendations.
In addition, the Federal Trade Commission, in coordination with the Department of Justice, will investigate whether proxy advisors engage in anticompetitive or deceptive practices that could harm investors. The Department of Labor is tasked with strengthening fiduciary standards for pension and retirement plans, ensuring that proxy advisors act exclusively in the financial interests of plan participants. Measures will also be taken to improve transparency around the use of proxy advisors in these plans.