On Dec. 11, President Donald Trump (R) issued an executive order increasing federal scrutiny of the two largest proxy advisory services, Glass Lewis and Institutional Shareholder Services (ISS). The executive order, “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors”, directs the Chairman of the Securities and Exchange Commission to expand oversight of and review regulation concerning the two firms.
Why does it matter?
The order directs the SEC to actively revisit how proxy advisors are regulated. It encourages the agency to revisit and potentially rescind all rules, regulations, and other guidance for proxy advisors that are inconsistent with the order, “especially to the extent that they implicate ‘diversity, equity, and inclusion’ and ‘environmental, social, and governance’ policies.”
It also directs the SEC to:
- Apply federal securities law anti-fraud provisions to statements in proxy advisors’ voting recommendations
- Examine whether an investment advisor consulting a proxy advisor on non-pecuniary factors violates the investment advisors’ fiduciary duty,
- Investigate whether investment advisors coordinate their voting decisions through proxy advisors,
- Consider requiring additional disclosures for proxy advisers related to topics such as their methodology for recommendations, and
- Consider whether proxy advisors qualify as Registered Investment Advisers under the Investment Advisers Act of 1940.
The order signals potential regulatory revisions that could constrain these firms’ influence over shareholder voting recommendations. Reducing the firms’ influence could shift more control toward company leadership or large asset managers.
Under the Administrative Procedures Act, the SEC must initiate separate rulemaking or formal guidance processes for any significant guidance or regulatory changes. However, with 2026 annual shareholder meetings set to begin in January, the order has immediate implications for corporate governance and proxy advisors.
What’s the background?
Proxy advisors provide shareholders with “research, voting recommendations, and administrative services related to the proxy voting process.” According to a September 2025 report from the Congressional Research Service, Glass Lewis and Institutional Shareholder Services account for “a combined market share of more than 90%” of the proxy advisory industry.
In July 2025, a decision from the U.S. Court of Appeals for the District of Columbia limited the SEC’s ability to regulate proxy advisors. The ruling held that “firms such as Institutional Shareholder Services (ISS) and Glass Lewis [do] not constitute a ‘solicitation’ under the Securities Exchange Act of 1934,” which overturned a 2020 SEC rule that applied the Exchange Act to proxy advisors.
Republican House members have also scrutinized proxy advisory firms this year. In May 2025, the House Financial Services Subcommittee on Capital Markets held a hearing examining how proxy advisors influence shareholder voting and whether additional legislative oversight is needed.
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