Director and General Counsel
Shareholder Rights Group
On December 11, 2025, President Trump issued an Executive Order directing federal agencies to reassess the regulation of proxy advisory firms and shareholder proposals. The order marks a significant federal intrusion into the proxy voting ecosystem and raises serious concerns about investor protection and choice including viewpoint discrimination, as well as the overall policy approach to regulation of capital markets.
The order says that the SEC should consider revising or rescinding rules on shareholder proposals inconsistent with the "purpose of this order", which in context means focusing on shareholder proposals that implicate "diversity, equity and inclusion" and "environmental social and governance policies."
With rulemaking on the shareholder proposal process already on the SEC’s spring agenda, we can now anticipate that it may include certain types of rule amendments—everything from repealing the shareholder proposal rule in its entirety to more narrow amendments targeting DEI and ESG. Bills in Congress have already proposed mechanisms such as banning certain subject matters outright or eliminating the significant policy exception to the ordinary business rule.
The scope of intended constraint on shareholder proposals is unclear. ESG is spelled out to include "environmental, social and governance." Therefore, it could be understood to encompass all issues that would normally be voted on through the shareholder proposal process. In practice the SEC may propose constricting environmental and social proposals and leave greater leeway for traditional governance shareholder proposals.
The shareholder proposal process has driven best practices in corporate disclosure on environmental and social issues. Since so many investors view environmental and social issues as material to their investment strategy for management of long-term enterprise profitability and risk, as well as systemic or portfolio-wide risk, the executive order contradicts investors' freedom to invest as they see fit, attempting to impose a narrower range of appropriate considerations in investing.
In my opinion, the underlying presumption that consumers do not care about environmental and social implications of a company's goods and services is also erroneous. There is strong evidence that they do care, further underscoring why narrowing the scope of appropriate investor influence on corporate policy is misguided; these issues affect consumer demand and therefore financial returns. Recent examples, including at Tesla and Target, illustrate how clearly these dynamics can manifest.
Banning these topics from the proxy statement would have a "hydraulic" effect, redirecting investor concerns into other forms of recourse that are likely to be more disruptive and less predictable, and halting the focused and efficient proxy process for elevating these issues.
The range of provisions in the order on proxy advice also represent an assault on the ability of investors to seek the proxy advice that they choose, implicating the first amendment as demonstrated in the ongoing Texas litigation where a federal district court enjoined enforcement of a Texas law seeking to regulate proxy advice on ESG topics.
*These are my personal opinions and may not reflect the view of individual Shareholder Rights Group members.