Shareholder Primacy State regulation of proxy advisors
Feb 25, 2026
State moves to regulate proxy advisors and the legal fight that followed. How Texas targeted ESG-related recommendations and why courts raised First Amendment and commerce clause concerns. Model conservative legislation that avoids saying ESG and the spread of those bills across red states. Possible business shifts for advisors and the effects on activism and proxy contests.
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Texas Law Made ESG A Free Speech Flashpoint
- State-level proxy advisor laws are an escalating response to federal and Texas efforts to curb ESG-driven recommendations.
- Texas law targeted ESG explicitly, forcing proxy firms to self-declare they 'don't focus on shareholders' financial interests,' prompting a First Amendment challenge and injunction.
New Model Law Targets Recommendations Against Management
- A conservative group created a model law that avoids the word ESG and instead triggers when a proxy advisor recommends against management.
- The model requires either admitting no written financial analysis or disclosing methods, personnel location, and analyses to clients and possibly target companies.
How Model Laws Spread Through State Legislatures
- Mike Levin recounts his Illinois state legislature internship experience to explain how model legislation spreads through state reps.
- He notes legislators often act as mouthpieces for model bills pushed by external groups like Consumer's Defense.