On December 11, 2025, President Trump signed an Executive Order directing changes related to the role and regulation of proxy advisory firms. The Executive Order includes several directives, including instructing the Secretary of Labor to take steps to revise regulations and guidance concerning the fiduciary status of individuals who manage, or advise those who manage, the voting rights associated with plan investments under the Employee Retirement Income Security Act (ERISA).
Here’s What You Really Need to Know
- The EO directs several government agencies – the Department of Labor (DOL), Securities and Exchange Commission (SEC) and Federal Trade Commission (FTC) –to scrutinize the practices of those who vote proxies and proxy advisors for encouraging or supporting environmental, social and governance (ESG) and diversity, equity and inclusion (DEI) agendas.
- The EO also calls for amendments that would convey investment advisor fiduciary status on any individual or proxy advisor who receives compensation for proxy voting or advising services.
- The EO further directs the SEC to consider if registered investment advisors breach their fiduciary duties by hiring proxy advisors to advise on non-pecuniary factors in investing, including factors such as DEI and ESG, and subsequently follow their recommendations.
Let’s Dive In
The Background:
Starting in 1994, ESG investing saw years of sub-regulatory guidance. In 2020, under the first Trump administration, the DOL published a final rule on “Financial Factors in Selecting Plan Investments” as well as “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” (referred to together as the 2020 Regulations).[ii] Both became final regulations aimed at quelling uncertainty related to ESG investing and proxy voting. Many (including the DOL under the Biden administration) argued that the 2020 Regulations did not successfully address uncertainty but instead had a chilling effect on ESG investing given some of the restrictive language on Qualified Default Investment Alternatives (QDIA), for example.
Although the 2020 Regulations became effective in early 2021, once in office, the Biden administration quickly made climate change a priority. On October 14, 2021, to address the concern that the 2020 Regulations had created uncertainty for ESG investing, the DOL issued a proposed regulation – Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights. This proposal combined the two 2020 Regulations into one regulation. In response, the DOL received 895 written comments and 21,469 petitions. Following several months, a final rule was issued on November 22, 2022 and took effect in early 2023.[iii] That final regulation has been challenged, but is still the regulation being followed today.
Fast-forward to 2025, and Spence v. American Airlines Inc., et al, also caught the attention of many. Although the case didn’t start off focusing on proxy voting, the issue of ESG influences on proxy voting related to plan investments wound up being the core focus of the American Airlines case, where the plaintiff successfully argued that the plan fiduciaries had violated their duty of loyalty (but not prudence) in permitting proxy votes in support of ESG initiatives.[iv]
The Executive Order’s Directives:
According to a fact sheet, the EO directs the Secretary of Labor to “strengthen ERISA fiduciary rules and increase fiduciaries’ transparency regarding their use of proxy advisors, ensuring proxy advisors and plan managers act solely in the financial interest of American workers and retirees.”[v] Three groups of regulators are directed to take action – FTC, SEC and DOL. This update will focus on the latter two groups:
The DOL is directed to:
- Revise regulations and guidance related to who is considered a fiduciary under ERISA when managing or advising on shareholder rights (like voting proxies or engaging with companies); this includes looking at whether proxy advisors (i.e., firms that give voting recommendations) should be treated as ERISA fiduciaries.
- Make sure fiduciary standards for ERISA plans are strong, including whether proxy advisors act solely in the financial interests of plan participants.
- Take steps regarding the transparency of proxy advisors.
The SEC is directed to:
- Examine whether proxy advisors serve as a vehicle for investment advisors to coordinate their voting decisions.
- Assess whether registered investment advisors breach their fiduciary duties by hiring proxy advisors to advise on non-pecuniary factors in investing, including on factors such as DEI and ESG, and subsequently follow their recommendations.
What Comes Next:
You may recall another EO from August 2025 for alternative investments that laid out a specific timeline for action within 180 days. That is not the case here; while the EO directs analysis and consideration of changes, there is no timeline for action specified in the EO. That said, and certainly in view of recent actions, it is reasonable to expect that there will be regulatory changes that could well require review and modification in current proxy review and voting procedures.
Action Items for Plan Sponsors:
For plan sponsors, consider the following action steps:
- Review and Educate: Review the EO and associated fact sheet and discuss with your investment advisor, consultant or other professional to ensure the guidance is understood.
- Apply to Your Plan: Review current plan proxy voting practices and procedures, if applicable, or discuss how your investment professional handles assessment of proxy voting with investment managers to your plan.
- Monitor Updates: The EO does not require any changes today; however, it signals potential changes in the future. Ensure you are working with a professional who can help keep you informed and up-to-date on future guidance.
[i] The White House, Protecting American Investors from Foreign‑Owned and Politically‑Motivated Proxy Advisors, Presidential Action (executive order, December 11, 2025), accessed December 12, 2025, https://www.whitehouse.gov/presidential-actions/2025/12/protecting-american-investors-from-foreign-owned-and-politically-motivated-proxy-advisors/
[ii] U.S. Department of Labor, Financial Factors in Selecting Plan Investments, 85 Fed. Reg. 72846–72885 (November 13, 2020), https://www.federalregister.gov/documents/2020/11/13/2020‑24515/financial‑factors‑in‑selecting‑plan‑investments, U.S. Department of Labor, Fiduciary Duties Regarding Proxy Voting and Shareholder Rights, 85 Fed. Reg. 81658–816?? (December 16, 2020), https://www.federalregister.gov/documents/2020/12/16/2020‑27465/fiduciary‑duties‑regarding‑proxy‑voting‑and‑shareholder‑rights
[iii] U.S. Department of Labor, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, 87 Fed. Reg. 73822–73886 (December 1, 2022), https://www.federalregister.gov/documents/2022/12/01/2022‑25783/prudence‑and‑loyalty‑in‑selecting‑plan‑investments‑and‑exercising‑shareholder‑rights
[iv] No monetary damages were assessed, though the federal judge imposed a series of operational restrictions on the plan’s administration, included participant notices and disclosures, as well as the addition of two independent committee members.
[v] The White House, Fact Sheet: President Donald J. Trump Protects American Investors from Foreign‑Owned and Politically‑Motivated Proxy Advisors, Fact Sheet (December 11, 2025), accessed December 12, 2025, https://www.whitehouse.gov/fact‑sheets/2025/12/fact‑sheet‑president‑donald‑j‑trump‑protects‑american‑investors‑from‑foreign‑owned‑and‑politically‑motivated‑proxy‑advisors/