For years, proxy advisors have played a major role in shaping shareholder voting outcomes by providing research and recommendations to institutional investors. Their US influence and primary source of income expanded significantly after the US Securities and Exchange Commission (SEC) rules in 2003 made it easier for investment and asset managers to rely on independent firms when fulfilling their proxy voting responsibilities. It has been argued that these proxy advisors wield excessive power, lack transparency in how recommendations are developed, and may sometimes prioritise issues like sustainability and diversity over shareholder returns.

What are the changing rules?

In July 2020, the SEC adopted rules to strengthen its oversight of proxy advisory firms and increase transparency and accountability. These rules required that:

• Proxy advisors provide companies with their voting recommendations at the same time they are sent to investors.
• Investors be notified if a company’s management formally challenged the proxy advisor’s recommendation.
• Proxy advisors disclose potential conflicts of interest to their clients.

In 2022, the SEC rolled back parts of the 2020 rules. However, the repeal has faced legal challenges, meaning the regulatory environment remains unsettled and contested.

Now the latest development was an Executive Order by the President of the US on 11 December 2025 that says, among many other things: “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”.  

The Executive Order has directed federal agencies to review existing proxy advisor rules, asked agencies to assess whether proxy advisory firms may have violated antitrust laws, and to consider new regulations to limit the influence of proxy advisors.

AI is also impacting the viability of proxy advisor business models. Major corporations like JPMorgan Chase and Wells Fargo no longer rely on proxy advisors, and have built their own analysis and voting systems using AI-driven tools. Their systems scrape the web for all relevant disclosures and print on a company’s remuneration, incentives, director elections, equity grants and governance.

An important message for ASX listed companies with US investors is to ensure your remuneration report is AI-readable with key messages clearly articulated and well-placed.

Proxy firms are likely to survive but may lose significant influence. It raises the question whether we will be moving to a world where proxy advisors are irrelevant? Probably not, because many institutional investors in countries with safe harbour provisions will still require outsourced advice rather than building their own stewardship teams.

Meanwhile, alternatives such as AI-based voting systems raise new concerns about transparency, company-specific analysis, and accountability.

What can boards do?

• Comprehensively understand their company’s investors, their voting guidelines and their voting history.
• Engage with investors throughout the year, not just during proxy season.
• Stay informed on regulatory and governance developments. For example for ISS and Glass Lewis announced changes see HERE.
• Ensure the right directors participate in engagement on relevant topics (e.g., RemCo Chair for remuneration, Board Chair for governance etc).

Ultimately, boards will focus on meeting their fiduciary duties and acting in the best interests of the company, regardless of shifting dynamics around proxy advisors.

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