Executive Order on Proxy Practices Issued

President Trump has issued an Executive Order (EO) Protecting American Investors from Foreign-Owned and Politically Motivated Proxy Advisors. The order is aimed at proxy advisors that prioritize politically-motivated agendas—like “diversity, equity, and inclusion” and “environmental, social, and governance” ahead of investor returns. The EO contends that two foreign-owned proxy advisors control more than 90 percent of the proxy advisor market, constituting a significant influence on publicly traded companies.

The EO directs the Securities and Exchange Commission to, consistent with the Administrative Procedures Act, review and consider revising or rescinding all rules, regulations, and guidance relating to proxy advisors that are inconsistent with the purpose of the order. Similarly, the Department of Labor shall take steps to revise all regulations and guidance regarding the fiduciary status of individuals who manage, or, like proxy advisors, advise those who manage, the rights related to shares held by plans covered under the Employee Retirement Income Security Act of 1974 (ERISA), including proxy votes and corporate engagement. DOL shall consider whether such revisions should include amendments specifying that individuals who have a relationship of trust and confidence with their client, including any proxy advisor, and who provides advice for a fee or other compensation, direct or indirect, with respect to the exercise of the rights relevant to shares held by ERISA plans, is an investment advice fiduciary under ERISA.