12/15/2025
Opinion: Why Trump Is Targeting Proxy Advisers
Wall Street Journal (12/15/25) Copland, James R.
James R. Copland, director of legal policy for the Manhattan Institute and a member of the U.S. Securities and Exchange Commission’s (SEC) Investor Advisory Committee, writes that President Trump issued a major executive order last Thursday that will help investors by kicking politics out of company boardrooms. It targets the proxy adviser industry, which advises pension funds, mutual funds and hedge funds on how to vote on corporate ballot items. This industry is long overdue for the “accountability, transparency, and competition” the order calls for. Two firms, ISS and Glass Lewis, control roughly 90% of the proxy advisory market. Each is foreign-owned: ISS is majority-owned by Deutsche Börse Group; Glass Lewis is owned by Peloton Capital Management, a Canadian private-equity firm, and its chairman, Stephen Smith. Aside from industry concentration and foreign ownership, two salient facts about these firms highlight the need for more federal oversight. First, although they only advise rather than direct voting for institutional investors, ISS and Glass Lewis exert a huge influence over a large swath of the American stock market. A 2021 Manhattan Institute study by Paul Rose, now dean of the Case Western Reserve University law school, found that 114 institutional investors with assets under management of more than $5 trillion voted in lockstep alignment with either ISS or Glass Lewis in 2020. An earlier study I co-wrote with Manhattan Institute colleagues found that an ISS recommendation “for” a shareholder proposal was associated with a 15-percentage-point increase in support; other studies have shown similar results, with Glass Lewis also having a major, if smaller, influence. Second, ISS and Glass Lewis have long been the driving force behind left-leaning adventurism in corporate boardrooms—backing the environmental and social proposals that constitute the “E” and “S” in ESG investing. In 2024 ISS supported 53% of all “social” shareholder proposals, while Glass Lewis supported 43%. ISS supported proposals at more than a dozen large companies to report on their “pay gaps” by race and sex. It backed proposals at eight others to report on their “diversity, equity, and inclusion efforts.” In 2025, perhaps owing to the change in administrations in Washington, ISS backed off its promotion of fashionable social causes; Glass Lewis, unlike ISS, still considers race and sex diversity in its recommendations for corporate directorships. And although ISS radically scaled back support for social proposals in 2025 and supported “only” 28% of environmental proposals this year, down from 61% in 2024, it still supported asking Deere & Co. to conduct a civil-rights audit. Support for these policies is particularly vexing given the strong evidence that they’re negatively associated with share value. With two foreign-owned proxy advisory firms pushing America’s biggest companies to the left, the administration was bound to take action. During the first Trump term, the Securities and Exchange Commission promulgated rules governing proxy advisers, but subsequent rescissions by the Biden SEC and litigation have left the industry mostly unregulated. Now that the White House has acted, it falls on the administrative agencies to carry out the executive order. The principal onus falls on the SEC, which oversees the stock market, but the order also mentions the Federal Trade Commission, which oversees antitrust issues, and the Labor Department, which oversees pension plans. The SEC, the order says, may need to revise or rescind “all rules, regulations, guidance, bulletins, and memoranda relating to shareholder proposals”—the main vehicle through which proxy advisers and various social-activist investors have pressured companies to jump on the ESG and DEI bandwagons. Chairman Paul Atkins has already flagged the questionable legal foundations of the SEC’s longstanding shareholder proposal rule in his public remarks. Even though proxy advisers have been at the leading edge of pushing companies to “go woke,” the big-three passive index fund families—BlackRock (BLK), Vanguard, and State Street (STT)—have also supported many ESG measures over the years. As ETF leader Jan van Eck recently observed in these pages, such shareholder activism is particularly incongruent for investment funds that merely mirror stock market indexes. Here’s hoping that the SEC considers clarifying that passive funds’ fiduciary duties should guide them to vote the way they invest—passively. But make no mistake: The president’s Dec. 11 executive order is a major shake-up to how publicly traded corporations in America are governed. It’s welcome news for those who would prefer companies to focus on making money, not political causes—including investors and pensioners who rely on their stock portfolios for their retirements.
Read the article