Protecting American Investors From Foreign-Owned And Politically-Motivated Proxy Advisors
Summary
This executive order aims to protect American investors from foreign-owned and politically motivated proxy advisors. It expresses concern that these advisors, particularly Institutional Shareholder Services Inc. and Glass, Lewis & Co., LLC, wield significant influence over corporate governance by promoting agendas like "diversity, equity, and inclusion" (DEI) and "environmental, social, and governance" (ESG). The order directs the SEC and FTC to increase oversight, revise regulations, and investigate potential anti-competitive practices. It also instructs the Secretary of Labor to revise regulations regarding the fiduciary status of individuals managing shares held by ERISA plans.
Expected Effects
The order could lead to stricter regulations and increased scrutiny of proxy advisors. This may result in a shift away from DEI and ESG-focused shareholder proposals. It could also change the way investment advisors handle retirement plans.
Potential Benefits
- Could increase focus on financial returns over political agendas in corporate decision-making.
- May reduce potential conflicts of interest within the proxy advisor industry.
- Could lead to greater transparency in proxy advisor recommendations and methodologies.
- Might strengthen fiduciary standards for pension and retirement plans.
- Could foster more competition within the proxy advisor market.
Potential Disadvantages
- May stifle important conversations around social and environmental responsibility in corporate governance.
- Could disproportionately impact companies that prioritize DEI and ESG initiatives.
- May face legal challenges based on potential overreach of executive authority.
- Could lead to decreased investor consideration of long-term sustainability factors.
- May be perceived as politically motivated interference in the investment sector.
Most Disadvantaged Areas:
Constitutional Alignment
The order cites the President's authority vested by the Constitution and laws of the United States. However, its alignment with the Constitution is debatable. Concerns arise regarding potential infringement on free speech (Amendment I) if the government unduly restricts proxy advisors' recommendations based on content. The order's focus on regulating investment advice could be argued under Congress's power to regulate commerce (Article I, Section 8), but the extent of executive authority in directing specific regulatory outcomes is subject to interpretation.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).