Thanks to a new executive order from President Trump, the days of shadowy proxy firms pushing progressive agendas behind closed doors may finally be numbered. And their loss will be American investors’ gain.
For years, foreign-owned proxy advisory firms ISS and Glass Lewis have heaved their weight around corporate America, arming shareholders with biased voting advice that subordinates free market principles to political fads like environmental, social, and governance (“ESG”) and diversity, equity, and inclusion (“DEI”).
Even as institutional investors have distanced themselves from progressive dogmas and refocused on fiduciary duty, proxy advisors have doubled down, continuing to tout sustainability-focused benchmarks that overweigh nebulous concepts like climate and social “risk” and consistently side with radical shareholder activists.
By definition, any screening criteria – whether DEI or ESG – constrains investment options, reduces diversification, and limits earning potential. But these voting recommendations don’t just keep investors’ returns low; they keep proxy firms gainfully employed. As several lawmakershave noted, the very same proxy firms advising shareholders to vote “yes” for racial equity audits, aggressive emissions cuts, board member quotas, and other corporate social responsibility gestures also sell specialized consulting services designed to help companies craft and implement those very policies.
As if this glaring conflict of interest and complete lack of independent oversight were not damning enough, ISS and Glass Lewis control 97% of the proxy advisory market. This obvious duopoly is more than an antitrust red flag – it’s a drag on portfolio performance from companies who have no incentive to deliver for investors and every reason to pad their own bottom lines.
While it’s not the first time proxy advisory firms have faced rightful scrutiny, President Trump’s latest executive order could mark a promising turning point in the fight to shield Americans’ investments from political influence. Building on lawsuits, hearings, and investigations spearheaded by states like Florida, Texas, and Missouri, the executive order marshals the full force of federal regulators like the SEC and FTC to investigate these firms and curb their influence.
Investing, done right, is not complicated. Middle- and working-class Americans – many of whom depend on pension plans and 401ks to retire comfortably – deserve the peace-of-mind that their hard-earned assets are in capable hands that will prioritize performance over politics. With ideology out of the picture, investors don’t have to wonder whether their dollars are drifting left or right – they can simply watch their returns go up and up. This executive order is a strong step in that direction.