In a move that is being hailed as a victory for Elon Musk, President Donald Trump has called for a review of two leading proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis.
What Happened: Trump issued an executive order on Thursday, instructing the Securities and Exchange Commission to examine the practices of ISS and Glass Lewis.
These firms, which provide guidance to shareholders on voting matters, have faced criticism from Musk and other corporate leaders for their sway over corporate decisions.
As reported by CNN, the executive order specifically targets the firms’ application of diversity, equity and inclusion (DEI) and environmental, social and governance policies (ESG).
Musk has previously expressed dissatisfaction with ISS and Glass Lewis, as they have advised investors to vote against corporate decisions at Tesla, including proposals for Musk’s remuneration package. The order is perceived as a victory for Musk and others who have raised concerns about the influence of proxy advisory firms.
ISS and Glass Lewis, owned by companies in Germany and Canada respectively, counsel major institutional investors like BlackRock, pension funds, and other asset managers. Their influence has expanded to such an extent that they have attracted scrutiny from various states and constituencies, reports the outlet.
The executive order also instructs the Federal Trade Commission to probe whether ISS and Glass Lewis are breaching antitrust laws. This follows a lawsuit by Florida’s attorney general, James Uthmeier, against the firms for alleged violation of state antitrust laws.
Why It Matters: Proxy advisory firms play a crucial role in guiding institutional investors on voting matters. However, their influence over corporate decisions has been a point of contention for many corporate leaders, including Musk.
The review ordered by Trump could potentially lead to changes in the way these firms operate, which could have far-reaching implications for corporate governance. This is particularly significant for Tesla, where ISS and Glass Lewis have previously recommended against corporate decisions.
The outcome of this review could potentially alter the balance of power between corporate leaders and shareholders.
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