Kathy Jaffari and Naz Jalali discuss the December 2025 executive order, “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors,” which seeks to increase federal oversight of proxy advisors and their practices, in The Legal Intelligencer. The order argues that these firms advance politically driven agendas at the expense of investor returns, and raises concerns about conflicts of interest and the quality of their recommendations. It directs the SEC, FTC, and Department of Labor to consider new rules, strengthen enforcement, increase transparency, and scrutinize whether proxy advisors’ activities align with federal securities and fiduciary duties. These directives include potential revisions to shareholder proposal rules, exploration of investment adviser registration requirements, and antitrust-related investigations.

Although implementation will take time, pressure from federal and state regulators has already prompted firms such as Institutional Shareholders Services and Glass Lewis to modify their practices by offering more customized voting guidance, adjusting ESG approaches, and registering as investment advisors. The evolving landscape is expected to shift responsibility back to institutional investors, who may need to conduct more independent voting analysis or rely on emerging AI tools rather than proxy advisors. For public companies, the changes could create both opportunities and challenges, including increased uncertainty in voting outcomes and the need for enhanced disclosures. The long-term impact will depend on how regulators execute the order and how investors and companies adapt.

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