Trump Executive Order on Proxy Advisers Sparks Concerns Over Shareholder Influence
A recent executive order from the White House targeting proxy advisory firms has raised alarms among corporate governance experts, who say it could shift power away from investors and toward CEOs and corporate boards.
The order instructs the Securities and Exchange Commission (SEC) and other agencies to scrutinize firms such as Institutional Shareholder Services and Glass, Lewis & Co. These companies provide guidance to large institutional investors, including mutual funds, on how to vote at corporate elections—giving them significant influence over some of the world’s biggest companies.
The Trump administration has argued that proxy advisers have used their influence to advance “radical politically-motivated agendas,” particularly on environmental and social issues, at the expense of shareholder returns. The directive has reignited debates about the role of environmental, social, and governance (ESG) considerations in investment decisions.
“This isn’t just about fiduciary responsibility—it’s a form of geopolitical maneuvering through financial markets,” said Sarah Wilson, CEO of UK-based proxy adviser Minerva Analytics. She added that investors want consistent, risk-adjusted returns and worry that the new order could disrupt their decision-making.
Among other measures, the order directs the SEC to consider changing or repealing rules related to shareholder proposals. Such proposals have long been a key tool for investors to hold companies accountable, for instance on executive pay or board elections. Critics argue that the move could diminish shareholder power by making it harder to influence corporate governance.
Attorney Sanford Lewis, who represents shareholder activists, said the order reflects the administration’s view that issues like diversity or climate change are unrelated to financial performance, despite evidence that strong ESG practices can boost long-term company value.
Meanwhile, U.S. business groups have welcomed the order, saying it would remove political influence from corporate decision-making. Charles Crain of the National Association of Manufacturers said the order addresses the outsized influence of proxy advisers and underlines the need for clearer oversight.
Some analysts view the move as part of a broader effort to recalibrate corporate governance. Michael Littenberg, an attorney with Ropes & Gray, described it as “a once-in-a-generation governance recalibration.”
Proxy advisers have previously faced criticism from top executives, including Elon Musk and Jamie Dimon, and have been scrutinized by both Democratic officials and pension funds. The firms have also adjusted their approach to ESG resolutions in response to backlash.
Legal experts caution that Trump’s order continues a trend to curtail shareholder engagement, despite the fact that many institutional investors see ESG considerations as critical to long-term, risk-adjusted returns.
