Where is corporate governance heading? Developments from the US

This article is part of Newsletter #28 of Esade’s Center for Corporate Governance. Subscribe here.

Are we witnessing a return to shareholder primacy and the end of the stakeholder approach?

On December 11, 2025, the president of the US, Donald Trump, issued an Executive Order entitled “Protecting American Investors from Foreign and Politically Motivated Proxy Advisors.” The title alone speaks volumes.

The Order seeks to strengthen the oversight and regulation of proxy advisory firms such as ISS and Glass Lewis—which together account for more than 90% of the market—due to their decisive influence on corporate governance and strategic decisions at major US companies, with a direct impact on the value of millions of citizens’ investments.

The text criticizes these firms for prioritizing political agendas—such as diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) criteria—over the essential objective of maximizing financial returns. It also warns of risks related to conflicts of interest and a lack of transparency in their recommendations. Against this backdrop, the Order aims to restore confidence in the sector through greater accountability, transparency, and competition. Its ultimate purpose is to protect investors’ savings—pension plans and funds—and to ensure that recommendations are grounded in financial considerations.

Its key elements include:

• Protection against politicized advice.

  The Order instructs the Securities and Exchange Commission (SEC) to review the applicable regulatory framework in order to: (a) amend or repeal provisions that are inconsistent with the Order’s objectives, particularly those incorporating DEI or ESG policies; (b) require greater transparency regarding methodologies, conflicts of interest, and recommendations; and (c) assess whether proxy advisors should be required to register as Investment Advisers and whether following recommendations based on non-financial factors may breach fiduciary duties.

• Oversight of anticompetitive practices.

  It directs the Federal Trade Commission (FTC), in coordination with the attorney general, to investigate whether proxy advisors engage in unlawful conduct, such as collusion, failure to disclose conflicts of interest, misleading information, or practices that limit informed decision-making, as well as any violations of antitrust laws.

• Protection of pension and retirement plans.

  The Order instructs the Department of Labor to review ERISA regulations (the law governing private pension plans) to strengthen fiduciary duties in the exercise of voting rights, ensuring that decisions are based exclusively on the financial interests of participants. This includes considering whether proxy advisors should be treated as fiduciaries under ERISA and increasing transparency regarding the use of non-economic criteria such as DEI and ESG.

A regulatory shift with global impact

The new Executive Order marks a profound shift in the architecture of corporate governance. It restores the central role of shareholders and relegates social, environmental, or political factors (ESG, DEI) as secondary considerations in voting decisions. The message is clear: recommendations must be justified on economic grounds, reinforcing transparency and fiduciary duties. This move aligns with Milton Friedman’s doctrine, articulated as early as 1970, that the sole social responsibility of business is to increase its profits within the legal and ethical framework.

While Europe has consolidated a stakeholder model with stringent regulations (albeit recently somewhat relaxed)—including sustainability due diligence, mandatory reporting, and the integration of ESG into corporate strategy—the US is opting for simplification and the maximization of financial value for shareholders. This shift restores the centrality of a classic principle of corporate law: the corporate interest is identified with the interest of the shareholders. For boards of directors, this means that invoking broad principles of social responsibility will no longer suffice; they will need to demonstrate the financial linkage of each decision.

The US is returning to Friedman’s orthodoxy, while Europe continues to advocate inclusive capitalism

The implications are clear: increased oversight of proxy advisors, limitations on ESG/DEI proposals at shareholder meetings, and an obligation for fiduciaries to substantiate that they are acting in the economic interest of beneficiaries. In addition, the FTC will investigate anticompetitive practices, potentially opening the market to greater competition. In the short term, this will ease regulatory pressure on sustainability in the US; in the medium term, it will require greater rigor in demonstrating the financial materiality of ESG risks.

The most complex challenge will be international. Multinational companies will have to manage dual standards: in the US, decisions anchored in financial criteria; in Europe, compliance with ESG obligations as part of the corporate interest. This will require the design of dual-track voting and engagement policies and the avoidance of contradictions: rejecting ESG proposals in the US may clash with European commitments, and vice versa. Upcoming shareholder meetings are likely to bring tensions: social or climate-related proposals will need economic evidence; proxy advisors will be required to disclose methodologies and conflicts of interest; and boards will have to construct narratives that integrate sustainability where it is material, explaining how it contributes to shareholder value.

This shift is not merely regulatory; it is ideological. The US is returning to Friedman’s orthodoxy, while Europe continues to advocate inclusive capitalism. In Friedman’s favor: companies should not replace the state in pursuing social policies, and doing so avoids strategic dispersion and loss of shareholder value. In Europe’s favor: long-term sustainability and reputational risks cannot be ignored, and the stakeholder approach treats them as sources of value creation. The global playing field is fragmenting, and companies will have to decide whether to play by two sets of rules—or find a way to turn sustainability into an unassailable financial argument.