On December 11th, President Trump signed an executive order that could mark one of the most significant shifts in corporate governance in decades. For years, proxy advisory firms—Institutional Shareholder Services (ISS), Glass Lewis, and the smaller Egan-Jones—have played a central role in shaping how shareholders vote. Historically, these firms leaned heavily toward supporting environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI) proposals. That influence helped accelerate the rise of ESG as a dominant theme in boardrooms.
But here’s an important nuance: in recent years, those firms have been very gradually dialing back their support for ESG and DEI proposals (with encouragement from us and many of our friends). That’s a positive development. However, it’s equally true that they have offered no support for proposals seeking to roll back ESG or DEI mandates. In other words, while they’ve moderated their enthusiasm, they haven’t opened the door to reversing these policies. The Trump Executive Order hits the accelerator pushing proxy advisors to either stop supporting ESG and DEI or provide rigorous financial analysis proving that it adds to returns. The data does not support these factors which means the companies are going to have to accelerate their exodus from making pro ESG and DEI recommendations. What does this change for us? Absolutely nothing. We have been in dialogue with the proxy advisory industry since 2019 pointing out exactly the problems which the executive order aims to fix. If the order causes those services to change their recommendations or stop making reommendations altogether, our work doesn’t change at all. We don’t follow their recommendations. We wrote our own.
What Does the Order Do?
The executive order directs the SEC, the Department of Labor, and other agencies to revisit rules that have allowed proxy advisors to dominate the governance landscape. It calls for:
- Greater transparency from proxy advisors about their methodologies and conflicts of interest.
- A review of shareholder proposal rules, especially those used to advance ESG and DEI agendas.
- Stronger fiduciary standards under ERISA, ensuring that proxy voting serves financial—not political—interests.
None of this came as a surprise to us. We anticipated these changes and have been planning for them for some time. Our engagement strategies, research frameworks, and client guidance have all been designed with this shift in mind.
Our Role in the Transition
We were way ahead of the curve on this. As early as 2019, we were in dialogue with proxy advisors about our concerns regarding the system’s tilt toward ESG and DEI. We didn’t just raise concerns—we acted. We wrote extensive custom proxy voting guidelines that are now used by our colleagues at Vident Financial and by numerous red-state public funds. These guidelines emphasize financial materiality and shareholder value, not political or social agendas.
We also have an extensive operational working relationship with the significant players in this space—ISS, Glass Lewis, Egan-Jones, and Broadridge. These relationships aren’t theoretical; they’re practical and ongoing. We’ve encouraged these firms to make the shifts needed to prepare for this new environment. Because we are deeply involved in creating proxy voting guidelines, conducting proxy voting audits, and executing proposal-based corporate engagement—each at very high scale—we have a zoomed-out view of the entire system. That perspective enables us to see the way forward as the industry undergoes massive restructuring.
The Way Forward for the Industry
This executive order doesn’t just change the rules—it accelerates a transformation that was already underway. Here’s what we see coming:
- More Customization and Proxy Voting Choice
Investors will demand greater control over how their shares are voted. The era of “one-size-fits-all” voting policies is ending. Expect more tailored voting guidelines aligned with investor priorities. Note for example the recent emergence of a set of Catholic proxy voting guidelines published by the Catholic University of America, which are already becoming the gold standard for Catholic insitutions. - A Stronger Focus on Pecuniary Benefit
Fiduciary duty will return to its core principle: acting in the best financial interest of the investor. ESG factors won’t disappear entirely, there will always be ideologically motivated investors who want to focus on social causes. - Clarity on Fiduciary Status
One of the most important outcomes will be a clearer distinction between entities that are fiduciaries—legally obligated to act in the investor’s best interest—and those that are not. This clarity will help investors understand who is making decisions on their behalf and under what obligations.
This restructuring is not a threat; it’s an opportunity. It’s a chance to build a system that respects investor choice, prioritizes financial outcomes, and operates with transparency. And we’ve been leading this charge for years. This executive order simply accelerates trends we’ve already championed: more customization, more choice, and a return to business fundamentals.
Does This End ESG and DEI?
Not entirely—but it does end their privileged position in the proxy system. For years, ESG and DEI advocates enjoyed a regulatory environment that gave them disproportionate leverage. They could file proposals with minimal ownership, and proxy advisors often recommended voting in favor, regardless of whether those proposals had a clear link to financial performance.
That era is over.
Under this order, ESG and DEI proposals will face a higher bar. They must demonstrate material financial relevance, not just ideological appeal. Pension funds and retirement plans will be required to vote based on pecuniary interests, not social objectives. Proxy advisors will have to disclose their methodologies and conflicts of interest, making it harder for non-pecuniary factors to be incorporated into what should be an economic process. ESG and DEI proxy voting will likely live on in the policies of political actors such as blue state pension plans and left-aligned foundations and some mainline church pension plans.
What Comes Next
The marketplace was already solving this problem, but very slowly. Now the administration is pushing for reforms to happen faster. Government has played its role, focusing the conversation where it belongs. Now it’s time for we in the marketplace to show the way forward, with rigorous, analysis performed beforehand leading backing up true fiduciary (not fauxduciary) voting, with proxy audits of that voting afterwards to ensure that clients’ interests were properly served. We look around and see worry in the industry. Are we worried? Far from it. We have never been more excited.