White House Order Aims to Curb Foreign and Political Influence Over Proxy Advice — What Investors and Governance Teams Need to Know

Quick take: an order that changes the balance of power on proxy day

The president has signed an executive order that targets proxy advisory firms the White House says are foreign-owned or driven by political agendas. The move doesn’t instantly rewrite the law, but it launches a fast-moving process that will force disclosure, tighten oversight and steer agency rulemaking. For investors and governance professionals, the likely result is a period of uncertainty: proxy recommendations could become harder to rely on, voting mechanics may shift, and asset managers will face pressure to beef up in‑house capabilities or change voting practices.

Exactly what the order directs regulators and firms to do

The executive order lays out several separate but linked steps intended to limit outside influence on U.S. shareholder votes. It doesn’t ban specific companies by name; instead it orders federal agencies to write rules and issue guidance that will reshape how proxy advisers operate.

Key elements the order asks agencies to pursue include:

• Ownership and influence disclosures. Proxy advisers will be required to disclose whether they are owned or controlled by foreign entities, and to spell out any ties between their owners and foreign governments or political organizations. Firms must also disclose political spending and advocacy that could suggest a non‑shareholder motive.
• Methodology transparency. Advisors will need to publish clearer explanations of how they reach recommendations, including inputs, scoring rules and data sources, so institutional investors can better evaluate the basis for advice.
• Registration and reporting requirements. The order directs agencies to consider registration, periodic reporting and certification steps for proxy advisory firms, similar to what other regulated financial services face today.
• Fiduciary guidance for plan managers. The Department of Labor is asked to clarify or tighten the rules that apply to retirement-plan fiduciaries who rely on third-party voting advice, pressing them to document independence checks before delegating votes.
• Restrictions on foreign influence. Agencies are asked to explore limits on foreign-controlled firms influencing U.S. proxy votes, including curbs on advisory services to public company shareholder meetings and on federal contracting.

Practically speaking, the order creates near-term deadlines for the SEC, DOL and other agencies to propose rule changes and to open public comment periods. It also signals administrative tools — like procurement bans or certification requirements — that could shape the market well before any new statutes are passed.

How this could change shareholder votes and the market

The most immediate effect will be on the supply and credibility of proxy recommendations. Two firms dominate the sector today; tighter disclosure and registration will raise their compliance costs and could slow the issuance of voting reports. That creates several knock‑on effects.

First, close corporate votes may become less predictable. If some investors choose to discount third‑party recommendations because of disclosed conflicts or foreign ownership, vote outcomes could tilt back toward management or toward blocs of index funds that vote according to internal policies.

Second, asset managers — especially index funds that historically lean on outside advice — will face a choice: invest more in internal stewardship teams, accept greater legal and operational risk, or continue to use external advisors but with tighter oversight. Any shift to more in‑house voting at large managers could concentrate power with institutions that already control billions in assets.

Third, short‑term market moves are possible in governance‑sensitive stocks. Companies facing contentious management challenges or high‑profile environmental or social campaigns could see wider swings around proxy season as uncertainty about voting outcomes grows. Over the medium term, companies that count on proxy‑firm pressure to change practices may find it harder to rally shareholder support.

Where this sits legally and what fights are likely next

The executive order steers agencies toward rulemaking, but it doesn’t change statute. That means most of the heavy lifting will happen through the Securities and Exchange Commission, the Department of Labor and potentially the Justice Department. Expect the SEC to be central: any new registration or disclosure rules for proxy advisers will flow through its rulemaking process.

Legal challenges are likely on several fronts. Affected firms can argue the order exceeds the president’s authority when it seeks to regulate private entities or to limit speech protected under the First Amendment. Asset managers could challenge DOL guidance if it narrows fiduciary discretion too tightly. Foreign firms and governments may raise diplomatic or trade objections if actions are seen as protectionist.

All of this means a long, messy period of litigation and administrative back‑and‑forth. But regulatory changes can also have quick practical effects: firms often update practices to avoid future fights, so some of the order’s intended impacts could appear well before court rulings are final.

How the industry is likely to respond

Proxy advisory firms will push back hard. Expect public comments arguing the order misreads their role, warnings about the costs of compliance, and legal challenges aimed at preserving business models. Their most practical defense will be to increase transparency and to offer clearer conflict disclosures.

Large institutional investors will split. Some asset managers will welcome clearer standards and use the moment to justify more internal voting infrastructure. Others will complain about higher costs and slower access to timely recommendations. Public companies and their advisers are likely to greet the order with guarded relief: anything that reduces the sway of proxy firms can help management advance its agenda in tight votes.

Foreign stakeholders will protest measures aimed at foreign ownership. Multinational firms that rely on cross‑border research and advice could face new compliance burdens or be forced to restructure operations for the U.S. market.

Practical moves investors and fiduciaries should make now

This is a moment to tighten processes, not to wait. Investors and plan fiduciaries should:

• Review how much they rely on third‑party advice and document the independence checks they apply before following recommendations.
• Ask asset managers to disclose how proxy advice is vetted and whether political or ownership ties were considered in recent votes.
• Prepare to accelerate internal voting capability or budget for higher costs if outside advice becomes less dependable or more expensive.
• Monitor SEC and DOL rulemaking closely — comment periods will be short and firms that engage early can shape outcomes.

The order is a clear attempt to shift influence away from outside advisory firms and toward direct fiduciary control. For investors, that raises both governance risk and a chance to reclaim more active stewardship — but it will come with higher costs, legal uncertainty and a scramble to adapt during the next proxy season.

Sources

• whitehouse.gov