This executive order is aimed at proxy advisors that play a significant role in shaping the policies and priorities of America’s largest companies through the shareholder voting process. The executive order states that proxy advisors wield enormous influence over corporate governance matters, including shareholder proposals, board compensation and executive compensation, and that certain proxy advisors use their power to advance and prioritize radical, politically motivated agendas, such as “diversity, equity and inclusion” and “environmental, social and governance” and support shareholder proposals that require an American companies to conduct racial equity audits and significantly reduce greenhouse gas emissions.

The order directs the chairman of the Securities and Exchange Commission (SEC) to review rules, regulations, guidance, bulletins and memoranda related to proxy advisors and to consider revising them; to enforce federal security laws anti-fraud provisions with respect to material statements and omissions contained in proxy voting recommendations; assess whether to require proxy advisors to register as Registered Proxy Advisors; consider requiring proxy advisors to provide increased transparency on recommendations, methodology and conflicts of interest; analyze whether a proxy advisor serves as a vehicle for investment advisors to coordinate and augment voting decisions of shareholders with respect to a company’s securities; and to direct the SEC staff to examine whether the practices of registered investment advisors of engaging proxy advisors are inconsistent with their fiduciary duties.

The executive order also directs the chairman of the Federal Trade Commission (FTC) to review ongoing state antitrust investigations into proxy advisors and determine if there is a probable link between conduct underlying those investigations and violations of federal antitrust law, and to investigate whether proxy advisors engage in unfair methods of competition or unfair, deceptive acts or practices that harm United States consumers.

Finally, the executive order directs the secretary of labor to take steps to (a) protect pensions and retirement plans from practices of proxy advisors, including revising regulations; (b) strengthen the fiduciary standards of pension and retirement plans covered under ERISA, including assessing whether proxy advisors act solely in the financial interests of plan participants and the extent to which any of their practices undermine the value of the assets of ERISA plans; and to take action to enhance the transparency concerning the use of proxy advisors, particularly regarding diversity, equity and inclusion and environmental, social and governmental investment practices.