Protecting American Investors From Foreign-Owned and Politically-Motivated Proxy Advisors

As a result, these proxy advisors wield enormous influence over corporate governance matters, including shareholder proposals, board composition, and executive compensation, as well as capital markets and the value of Americans' investments more generally, including 401(k)s, IRAs, and other retirement investment vehicles. These proxy advisors regularly use their substantial power to advance and prioritize radical politically-motivated agendas—like “diversity, equity, and inclusion” and “environmental, social, and governance”—even though investor returns should be the only priority. For example, these proxy advisors have supported shareholder proposals requiring American companies to conduct racial equity audits and significantly reduce greenhouse gas emissions, and one continues to provide guidance based on the racial or ethnic diversity of corporate boards. Their practices also raise significant concerns about conflicts of interest and the quality of their recommendations, among other concerns. The United States must therefore increase oversight of and take action to restore public confidence in the proxy advisor industry, including by promoting accountability, transparency, and competition.

(b) Consistent with the APA, the SEC Chairman shall consider revising or rescinding all rules, regulations, guidance, bulletins, and memoranda relating to shareholder proposals, including Rule 14a-8 (17 CFR 240.14a-8), that are inconsistent with the purpose of this order.

(c) The SEC Chairman shall:

(i) enforce the Federal securities laws' anti-fraud provisions with respect to material misstatements or omissions contained in proxy advisors' proxy voting recommendations;

(ii) assess whether to require proxy advisors whose activities fall within the scope of the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq. ) and the rules promulgated thereunder, to register as Registered Investment Advisers;

(iii) consider requiring proxy advisors to provide increased transparency on their recommendations, methodology, and conflicts of interest, especially regarding “diversity, equity, and inclusion” and “environmental, social, and governance” factors;

(iv) analyze whether, and under what circumstances, a proxy advisor serves as a vehicle for investment advisers to coordinate and augment their voting decisions with respect to a company's securities and, through such coordination and augmentation, form a group for purposes of sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq. ); and

(v) direct SEC staff to examine whether the practice of Registered Investment Advisers engaging proxy advisors to advise on (and following the recommendations of such proxy advisors with respect to) non-pecuniary factors in investing, including, as appropriate, “diversity, equity, and inclusion” and “environmental, social, and governance” factors, is inconsistent with their fiduciary duties.

(b) The FTC Chairman, under the authorities provided in the Federal Trade Commission Act (15 U.S.C. 41 et seq. ) and in consultation with the Attorney General, as appropriate, shall investigate whether proxy advisors engage in unfair methods of competition or unfair or deceptive acts or practices that harm United States consumers by:

(i) conspiring or colluding, explicitly or implicitly, to diminish the value of consumer investments (including pensions and retirement accounts);

(ii) failing to adequately disclose conflicts of interest;

(iii) providing misleading or inaccurate information;

(iv) undermining the ability of consumers to make informed choices; or

(v) otherwise engaging in conduct that violates the antitrust laws as defined in 15 U.S.C. 12(a) or section 5 of the Federal Trade Commission Act (15 U.S.C. 45).

(b) The Secretary of Labor shall take all appropriate action to strengthen the fiduciary standards of pension and retirement plans covered under ERISA. Such action shall include assessing whether proxy advisors act solely in the financial interests of plan participants and the extent to which any of their practices undermine the pecuniary value of the assets of ERISA plans.

(c) The Secretary of Labor shall take all appropriate action to enhance transparency concerning the use of proxy advisors, particularly regarding “diversity, equity, and inclusion” and “environmental, social, and governance” investment practices.

(i) the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

(d) The costs for publication of this order shall be borne by the Department of Labor.