The Trump administration is actively considering significant new regulations that would dramatically reshape corporate governance in the United States by limiting the influence of powerful proxy advisory firms and major index-fund managers, according to people familiar with the matter.
Executive Order Targets Proxy Advisers
Administration officials have been discussing at least one executive order that would impose restrictions on proxy-advisory firms including Institutional Shareholder Services (ISS) and Glass Lewis. The proposed measures could include a comprehensive ban on shareholder recommendations or specifically blocking recommendations for companies that have previously engaged the same firms for consulting services.
This development comes amid growing criticism from prominent business leaders. JPMorgan Chase CEO Jamie Dimon has publicly stated that these firms have conflicts of interest, while Tesla CEO Elon Musk has gone further, labeling them as "corporate terrorists." The tension escalated recently when both ISS and Glass Lewis recommended against Musk's historic $1 trillion compensation package, though shareholders ultimately approved the plan.
Index Fund Voting Power Under Scrutiny
The administration is simultaneously exploring measures to curtail the voting power of index-fund behemoths BlackRock, Vanguard Group, and State Street. These three financial giants collectively own approximately 30% or more of many major U.S. publicly traded companies on behalf of their clients.
One specific proposal under consideration would require these index-fund managers to align their voting decisions with clients who opt to vote themselves. This addresses concerns about the concentrated power these firms wield in shareholder decisions.
Activist investor Carl Icahn has referred to the three major index-fund managers as a "cartel," arguing they've made it nearly impossible for activists to successfully run proxy contests for corporate board control.
Industry Response and Market Impact
In response to the potential regulations, ISS emphasized its status as a registered investment adviser already regulated by the Securities and Exchange Commission. The firm stated it remains committed to "operating in a transparent and ethical manner" and takes pride in providing "high-quality, independent and objective advice."
Glass Lewis acknowledged that providing consulting services to boards while advising shareholders on voting creates "significant conflict of interest," but expressed preference for addressing these matters through the standard regulatory process rather than executive orders. Notably, the firm recently announced it would discontinue its "benchmark" voting recommendations starting in 2027, shifting focus toward tailored advice for individual clients.
The discussions within the White House have been ongoing for several weeks and remain fluid, with various drafts of the proposed executive order circulating among officials. A White House official cautioned that "until officially announced by the White House, discussion about potential executive orders is speculation."
Meanwhile, Broadridge Financial Solutions has been actively positioning itself as an alternative to the established proxy advisers. The firm has emphasized that it does not provide voting recommendations but rather offers research and voting infrastructure services. Broadridge has successfully attracted major clients including Goldman Sachs Asset Management and J.P. Morgan Asset Management, and has been recruiting executives from both proxy-advisory firms and large asset managers.
Experts note that while proxy advisers provide valuable services, particularly for smaller fund managers who lack resources to analyze hundreds of ballot proposals, their recommendations sometimes disproportionately influence voting outcomes. University of Florida finance professor Tao Li observed that these firms offer "a cheap defense against lawsuits from the investor's own clients" by providing reputable third-party analysis.
The administration is also considering raising the requirements for investors seeking to submit proposals through annual proxy statements. Currently, shareholders holding as little as $2,000 of securities for three years can put forth proposals, a threshold that has frequently drawn criticism from corporate management.
