Trump Orders Review of Major Proxy Advisory Firms, Targeting ISS and Glass Lewis

In a move that has stirred both Wall Street and Corporate America, President Donald Trump has issued an executive order directing a federal review of two of the most influential proxy advisory firms: Institutional Shareholder Services (ISS) and Glass Lewis. These firms, which guide major investors on shareholder votes, have long faced criticism from corporate leaders, including Tesla CEO Elon Musk, over their influence on corporate decision-making. The order specifically calls for scrutiny of how these firms integrate diversity, equity, and inclusion (DEI) policies, as well as environmental, social, and governance (ESG) criteria, into their recommendations.

Proxy advisory firms wield substantial power in corporate America. By advising institutional investors such as pension funds, asset managers, and major mutual funds, ISS and Glass Lewis can indirectly shape board decisions, executive pay, mergers, and other critical corporate actions. Their recommendations are often followed closely by shareholders who manage trillions of dollars in assets, effectively amplifying the firms’ influence on corporate governance. Critics, including Musk and JPMorgan CEO Jamie Dimon, argue that these firms sometimes prioritize politically-driven agendas over shareholder value, with Dimon labeling them “incompetent” in past statements.

Trump’s executive order reflects growing conservative concerns over “woke capitalism,” where corporate boards, investors, or advisors promote social or political agendas—such as DEI and ESG—that may conflict with traditional profit-driven priorities. While the executive order does not immediately alter how ISS and Glass Lewis operate, it signals heightened regulatory scrutiny. Experts suggest that firms may adjust methodologies, increase transparency, or reconsider politically charged recommendations to avoid conflicts with regulators.

Founded in 1985 and 2003 respectively, ISS and Glass Lewis are based internationally, with ownership in Germany and Canada. Their research and advice cover a wide array of corporate governance matters, including executive compensation, board composition, climate and environmental strategies, and major corporate transactions. Some Wall Street figures question whether such global, for-profit entities should have substantial influence over American corporate governance.

The executive order also directs the Securities and Exchange Commission (SEC) and Federal Trade Commission (FTC) to investigate the firms’ use of ESG and DEI policies and potential antitrust violations. ISS has stated its commitment to independence and professionalism, while Glass Lewis has yet to comment publicly. Meanwhile, state-level legal actions, such as Florida’s attorney general lawsuit alleging antitrust violations, highlight growing scrutiny of these firms.

The announcement marks a symbolic victory for Musk and other critics, though the ultimate impact remains uncertain. Legal and regulatory reviews will determine whether ISS and Glass Lewis need to change operations or methodologies. Analysts suggest that this could reshape the proxy advisory landscape and subtly shift power back toward corporate boards.

What Undercode Say:

Trump’s executive order is emblematic of a broader clash between regulatory oversight and corporate governance influence. Proxy advisory firms have become quasi-authorities in shareholder voting, creating tension between their recommendations and corporate autonomy. By targeting ISS and Glass Lewis, the administration is signaling that the federal government may begin to question the role of politically-influenced guidance in corporate decision-making.

The order’s focus on DEI and ESG policies is not coincidental. These initiatives have been increasingly politicized, with conservatives arguing that they prioritize social objectives over shareholder returns. In practice, ISS and Glass Lewis often provide data-driven recommendations, but their frameworks incorporate social and environmental considerations that can affect votes on executive pay, board elections, and mergers. Trump’s scrutiny could incentivize firms to limit these elements or more clearly justify their inclusion to investors, potentially reshaping corporate strategies.

Corporate leaders like Musk and Dimon have long criticized these firms for what they perceive as overreach. Musk’s experience with ISS and Glass Lewis in Tesla-related shareholder votes illustrates how advisory recommendations can conflict with company goals, particularly when executive compensation or strategic decisions are involved. Dimon’s warning about “international institutions” controlling U.S. governance underscores broader concerns about external influence in domestic corporate affairs.

The regulatory review also has antitrust implications. Both the SEC and FTC will assess whether the firms’ dominant market positions create unfair influence over institutional investors. If violations are found, this could result in new rules or restrictions that limit their advisory power, fundamentally altering the proxy voting ecosystem. Legal precedent, such as Florida’s lawsuit, suggests momentum is building toward increased oversight.

This executive order also signals a cultural shift. In recent years, Corporate America embraced ESG and DEI initiatives, often with strong investor support. Trump’s intervention is part of a broader conservative pushback against “woke capitalism,” highlighting the political dimensions of corporate governance. Companies and investors may now face competing pressures: meeting shareholder expectations while navigating potential regulatory constraints.

While the immediate effect may be subtle, the long-term consequences could be significant. Advisory firms may adopt more neutral approaches, prioritize financial metrics over social considerations, or enhance transparency to preempt criticism. This could reduce the political dimension of shareholder voting, giving boards greater leverage to pursue strategic priorities without external pressure.

Trump’s move also reflects a strategic alignment with high-profile corporate figures who have publicly criticized ISS and Glass Lewis. By championing regulatory oversight, the administration positions itself as defending traditional shareholder interests, appealing to investors and executives wary of politically influenced advisory recommendations.

In practice, the review process may unfold gradually, with SEC and FTC investigations taking months or years. Outcomes could include revised guidance, stricter disclosure requirements, or even structural changes to proxy advisory operations. Investors, in turn, will need to monitor how firms adapt, especially in sectors like technology and finance where ESG and DEI factors are highly debated.

Ultimately, the executive order underscores a growing tension between profit-driven governance and socially-driven advisory frameworks. Companies, investors, and advisors will need to navigate this evolving landscape carefully, balancing compliance, shareholder expectations, and reputational considerations. While the order is unlikely to immediately alter day-to-day proxy recommendations, it creates a precedent that could redefine the role of proxy advisory firms in American corporate life.

Fact Checker Results:

✅ ISS and Glass Lewis are the two largest proxy advisory firms, guiding institutional investors.
✅ The executive order targets their use of DEI and ESG policies in shareholder recommendations.
❌ No immediate rule changes have been implemented; investigations are ongoing.

Prediction:

Proxy advisory firms may recalibrate their recommendations to avoid regulatory scrutiny, potentially reducing the influence of DEI and ESG in shareholder votes. Boards could regain more strategic control, and the political debate over “woke capitalism” in Corporate America is likely to intensify. 💼📊