President Donald Trump has signed an executive order directing federal agencies to review the practices of major proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis. The move places new attention on firms that guide shareholder voting at public companies. Importantly, the order focuses on whether current practices comply with existing laws.

Proxy advisors play a key role in corporate governance. They provide voting recommendations to institutional investors on issues such as board elections, executive pay, and shareholder proposals. As a result, their guidance often influences how large investors vote. The administration argues that this influence deserves closer oversight.

The order comes amid growing debate about the role proxy advisors play in shaping corporate decisions. In recent years, criticism has intensified from business leaders and conservative policymakers.

What the Executive Order Requires

The executive order instructs several federal bodies to examine proxy advisory activities. Specifically, it calls on regulators to assess whether firms have breached securities, labor, or antitrust laws. At the same time, it asks agencies to consider whether additional rules are needed.

Key agencies involved include:

• The Securities and Exchange Commission, which will review disclosure and compliance rules
• The Department of Labor, which oversees fiduciary duties tied to retirement funds
• The Federal Trade Commission, which may examine competition and coordination concerns

Additionally, the order highlights concerns about potential conflicts of interest. It also raises questions about transparency in voting recommendations. According to the administration, clearer disclosure could help investors make more informed decisions.

Criticism of Proxy Advisors’ Influence

Critics argue that proxy advisory firms hold outsized power in corporate governance. Because many institutional investors rely on their research, recommendations can sway voting outcomes. Consequently, some executives believe this system concentrates too much influence in a small number of firms.

Several prominent business figures have publicly questioned the role of proxy advisors. They claim the firms sometimes promote governance or ESG-related positions that may not align with shareholder returns. Supporters of the order say the review will help restore balance.

Ownership structure has also drawn attention. ISS is majority-owned by a European exchange group, while Glass Lewis is owned by a Canadian investment firm. The administration has cited these links while discussing foreign influence in U.S. markets.

Industry Response and Broader Implications

ISS has stated that it provides independent research and that clients retain full control over how they vote. The firm has emphasized that investors can customize voting policies rather than follow default recommendations. Glass Lewis has not issued a detailed public response.

Meanwhile, governance experts warn that excessive regulation could limit access to independent analysis. They argue that proxy advisors help smaller investors participate effectively in corporate voting. However, supporters of the review counter that accountability and transparency are necessary.

Overall, the debate over proxy advisory oversight reflects wider tensions in U.S. business policy. It highlights disagreements over ESG influence, shareholder rights, and regulatory reach. As agencies begin their reviews, the findings could shape future rules governing corporate voting in the United States.