White House Executive Order Targets Proxy Advisory Firms and Signals Heightened Regulatory Scrutiny

Key Elements of the Executive Order

The executive order directs the Securities and Exchange Commission (“SEC”), Department of Labor (“DoL”) and Federal Trade Commission (“FTC”) to reassess existing rules, guidance and enforcement priorities relating to proxy advisors and proxy voting. In particular:

• SEC Review of Proxy Advisor Practices. The SEC is directed to evaluate whether proxy advisors should be subject to additional regulation, including potential registration as investment advisers, enhanced conflict-of-interest disclosures and greater accountability for factual accuracy in voting recommendations. The executive order also calls for consideration of whether proxy advisors could facilitate coordinated voting by investment advisers in ways that could cause investors to form a “group” under sections 13(d)(3) and 13(g)(3) of the federal securities laws.
• Renewed Focus on Shareholder Proposals. The SEC is instructed to review rules and guidance governing shareholder proposals, including Rule 14a-8, particularly where proposals implicate environmental, social or governance (“ESG”) or diversity, equity and inclusion (“DEI”) themes. This likely means renewed attention by the SEC to the scope, eligibility, guidance and administration of shareholder proposals.
• FTC and Antitrust Scrutiny. The FTC, in consultation with the Department of Justice (“DoJ”), is directed to investigate whether proxy advisory firms engage in anticompetitive or deceptive practices, including through conflicts of interest or misleading recommendations, and recommends the review by the DoJ of ongoing state antitrust investigations to evaluate if there is a probable link between those investigations and violations of federal antitrust laws.
• DoL Action on Fiduciary Duties. The DoL is instructed to revisit ERISA fiduciary standards as they relate to proxy voting and engagement, with an emphasis on ensuring that voting decisions are based on pecuniary considerations rather than broader policy objectives.

What This Means for Public Companies

The executive order does not itself alter proxy rules or voting mechanics. Any meaningful changes would require further rulemaking or enforcement initiatives. Even so, we would expect this executive order to translate into increased near-term regulatory and enforcement activity affecting the proxy ecosystem.

A Few Practical Takeaways for Issuers

• Be prepared for more opaque proxy voting results. In our view, companies can expect greater divergence in investor voting behavior and less automatic reliance on proxy advisor recommendations leading to less concentrated vote results and thus a more challenging approach to determining how a vote, particularly a contested vote, is likely to result.
• Strengthen proxy advisor engagement processes. Rapid identification and documentation of factual inaccuracies in proxy advisor reports may become increasingly important. If the SEC increases enforcement attention to material misstatements and omissions in voting advice, issuers may have more leverage to press for corrections, particularly where a report contains factual errors that can be documented.
• Renewed focus on 14a-8 proposals. The executive order’s express callout of Rule 14a-8 increases the likelihood that the SEC will revisit parts of the shareholder proposal process. Beyond the SEC’s recent announcement that it effectively would not be involved in no-action determinations this proxy season, it can be anticipated that the SEC will continue to scrutinize whether and to what extent shareholder proposals, particularly those related to ESG or DEI topics, are the proper subject for direct shareholder input or if companies will be more readily able to exclude such proposals. Issuers should anticipate a “chilling” effect in shareholder proposals being brought by proponents, and the nature and subject of proposals that are being brought will be more focused on traditional (and less polarizing) governance topics. It may be that other proxy voting activities increase, such as “vote no” campaigns against board directors for shareholders to lodge dissatisfaction with a company and such vote results become more difficult to ascertain with more diffuse voting patterns that are less reliant on ISS and Glass Lewis voting recommendations.
• Pecuniary focus. Some institutional investors will be more cautious in how they rely on proxy advisors, especially for votes tied to “non-pecuniary” rationales. Stewardship teams — particularly those managing ERISA assets — may ask for clearer articulation of the financial case for (or against) certain governance or policy actions.
• Monitor regulatory developments closely. While immediate change is unlikely, the executive order strongly suggests a more interventionist regulatory environment for proxy advisors. We can also anticipate that the proxy advisors may seek judicial relief on constitutional and other grounds against federal agency actions resulting from this executive order, which may delay or complicate the full repercussions of these developments on the corporate issuer and shareholder communities.
• Impact on contested situations. It may be too early to determine what impact these developments will have on the outcomes of traditional activist proxy contests, which have historically turned on company-specific facts, investor engagement and campaign execution. But full implementation could raise solicitation costs for all parties, as activists and issuers may be forced into running stronger parallel campaigns: increasing their direct engagement with investors while simultaneously continuing to manage the proxy advisors.

Bottom Line

The executive order is best understood as a strong policy message rather than an immediate legal change. It underscores growing political and regulatory skepticism toward the proxy advisory industry and may accelerate shifts in investor behavior and regulatory oversight that public companies should factor into proxy planning and shareholder engagement strategies for 2026 and beyond.