Texas Threat: Attorney General Targets Proxy Advisors in Fresh Attack

September 18, 2025

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By Jack Grogan-Fenn

A new investigation into two major proxy advisors has been commenced by Texas Attorney General Ken Paxton accusing them of “potentially misleading institutional investors and public companies”.

Paxton alleged this may have been done by issuing voting recommendations that “advance radical political agendas rather than sound financial principles”. This forms part of a wider attempt in both Texas – particularly in the form of Senate Bill (SB) 2337, as reported by Minerva Analytics – and by Republican state officials to restrict proxy advisors and shareholder.

“Proxy firms too often sacrifice sound financial guidance to advance left-wing political goals, cheating not only investors but the American people as a whole,” said Paxton. “Proxy advisors play a massive role in shaping corporate governance decisions in our country, affecting tens of billions of dollars. My office has zero tolerance for these woke corporations smuggling radical, liberal ideology into the companies they advise and into the entirety of America’s financial system.”

Minerva’s mission

Minerva Analytics has this week filed a Texas Public Information Act (TPIA) request (freedom of Information request) with the Texas Attorney General following a series of escalating legal moves surrounding SB 2337. The proposed Texas law is aimed at restricting proxy advisory services and investor choice on a worldwide basis.

The law was due to come into effect on September 1, but a preliminary injunction was granted by a Trump-appointed Republican judge in the state following lawsuits from two major proxy advisors. A trial is now set for February 2, 2026. The judge reportedly said the statute wrongly compels speech by forcing the advisory firms to issue disclosures “they don’t think are accurate”.

Minerva’s TPIA request seeks disclosure of communications between the Attorney General’s office, the Texas Stock Exchange, and related parties concerning proxy advisory services and SB 2337. The objective is to clarify whether coordination has occurred and to safeguard investors’ right to independent analysis free from political interference.

The Texas Stock Exchange and the Texas Association of Business moved to intervene in support of SB 2337 last month ahead of the injunction ruling. James H Lee, Chairman and CEO of TXSE Group said SB 2337 would bring “long-overdue transparency and basic honesty to the proxy advisory system”. The parent company of the Texas Stock Exchange submitted paperwork to operate as a national securities exchange at the start of this year and is reportedly aiming to launch in 2026.

“This is not just a dispute about two firms. SB 2337 strikes at all independent research providers and at the investor choice that underpins fiduciary duty, said Sarah Wilson, CEO of Minerva Analytics. “Placing political conditions on how research is produced or accessed is an attack on the freedom of expression in financial analysis and risks fragmenting oversight of US markets.”

“Minerva is doing this to defend investor choice and the freedom of expression essential to independent investment research,” she added. “SB 2337 is drafted broadly and would apply to every proxy advisor, including Minerva. The timing of the Texas Stock Exchange’s intervention in the ongoing legal action raises concerns about coordination aimed at chilling independent advice.”

“If allowed to succeed, SB 2337 would set a damaging precedent: state-level political controls over commercial speech, reduced investor choice, and a patchwork of conflicting rules that would encroach on the Securities and Exchange Commission’s established federal authority,” said Wilson. Alarmingly, SB 2337 does not turn on the location of the proxy advisor or the client, meaning it would cover non-Texan proxy advisors’ advice to non-Texan clients whenever that extra-Texas speech concerns a Texas company or potential Texas company.

Minerva also notes that, if allowed to proceed, Texas’s approach would set a damaging precedent: state-level political control over research speech, reduced investor choice, and a patchwork of conflicting rules that undermine confidence in US capital markets and encroach on the SEC’s established federal authority.

Proxy advisor pursuit

Paxton has issued Civil Investigative Demands (CIDs) to the “proxy advisor duopoly” to determine if they violated Texas consumer protection laws, including those prohibiting nondisclosures of material facts. 

A CID is a pre-complaint investigative tool allowing the Attorney General to demand documentary materials, written interrogatories, and oral testimony, from a person believed to be in possession of materials or information relevant to a statutory investigation. Its purpose is to gather evidence in order to assess whether a civil action or other enforcement is warranted and is not a lawsuit in itself.

Texas’ Attorney General can issue a CID when there is reason to believe someone has information or materials relevant to an antitrust investigation or if they have reason to believe that a person may have documentary material or other evidence relevant to a civil racketeering investigation before a civil proceeding is begun.

The new investigation by Texas echoes that launched by Florida’s Attorney General earlier this year. In March, an investigation was announced into whether two leading proxy advisors’ advice involving the consideration of ESG and DEI constituted deceptive or unfair trade practices under Florida law or a violation of the state’s antitrust law.

Texas’ Paxton previously faced securities fraud charges in a nine year case, during which time he was impeached and acquitted, and he has been mired further reported controversies this year both professionally and personally. Last month, it was also reported that the top donor of Paxton’s political action committee, Chelsey Milton, is the wife of Arizona businessman Trevor Milton who pardoned by Trump earlier this year.

This year has seen a barrage of attempts to kneecap proxy advisors. This includes a hearing held last week entitled “Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder Value” by the Republican-run House Committee on Financial Services. As reported by Minerva Analytics, it showcased pipeline of proposed regulation seeking to significantly restrict both proxy advisors and shareholder rights.

The hearing considered 15 items of legislation, comprising two bills and 13 discussion drafts, which would significantly impact proxy advisors. No proxy advisors were witnesses at the hearing, while the three of the four witnesses were slanted in favour of regulation for proxy advisors and stripping back shareholder rights, with Comptroller of the City of New York the sole dissenting voice.

Texas’ campaign to pare back shareholder rights and pressure proxy advisors has made it look more attractive to many companies. This includes Tesla, who reincorporated in Texas following Delaware, where the company was previously incorporated, rejecting a major pay package for CEO Elon Musk.

During the hearing, Brad Sherman, a Democrat committee member for California, described the idea of leaving shareholder rights to a matter of state corporate law as an “outrageous attack on shareholder power”.

“You’ve got 50 states, so if Delaware says no to a trillion-dollar compensation package, you just go to Texas,” he said. “But wait a minute, Texas might limit you to a trillion. Go to Wyoming, they’ll do two trillion. And if you need three trillion, you just incorporate in the Cayman Islands.

“Wyoming is desperate for money for their state operations,” he added. “It’s not the job of their legislators to police the national capital markets. And if they see 10 or 20 or 30 million dollars of revenue for their state, why shouldn’t they accept that in order to make sure that Elon Musk gets two trillion instead of the one trillion that tech that cheap people in Texas might limit him to.” 

Fellow Democrat Maxine Waters also stressed that “if Republicans get their way by silencing investors and remaking their boards to no longer be independent, public companies may experience a fate similar to that of Enron or WorldCom”, also referencing Tesla’s Texas reincorporation.

Exxon exploits

Oil and gas giant ExxonMobil, which is incorporated in Texas, this week received approval from the SEC to introduce new retail investor-focused voting mechanism that will allow retail investors to automatically cast ballots in step with board recommendations during annual meetings.

It appears that investors would actively have to opt into Exxon’s “Retail Voting Program” rather than being auto-enrolled and will have the ability and choice to opt out and cancel the standing voting instruction at no cost. The SEC has additionally stated that retail shareholders that have opted in to the Retail Voting Program will receive an annual reminder of their opt-in status and selection and a reminder that they can opt out and cancel their standing voting instruction.

There are concerns that the programme could be Exxon looking capitalise on “laziness” from some non-activist and less engaged investors, and could provide an example of a system for other companies to adopt. While a definitive link is not clear at this stage, some have also suggested that the move could be an attempt to counter shareholder activism.

Exxon has been subject to several campaigns from activist shareholders, with three dissident directors being elected to its board the highest profile example. Exxon has also previously faced allegations of lobbying against climate change legislation and the oil and gas giant could well take a public anti-ESG stance given the current regulatory and political picture.

BlackRock’s balancing act

Asset managers have also been at the centre of a high profile ESG-focused political tug-of-war in the US this year, facing a similar campaign to that targeting proxy advisors from the US right-wing. Major asset manager including BlackRock, JP Morgan, State Street and Vanguard, were recently sent letters by both Democrat and Republican finance officials issuing different demands.

The letter from the Democrats called on the asset managers to publicly reassert their commitment to responsible stewardship practices, while the Republican letter requested that they scale back their ESG-related investment activities to continue to compete for business within the states.

Ahead of the September 1 deadline set by both letters for asset managers to respond, BlackRock published a statement responding to the Democrats and Republicans. It stated that the letters “continue a concerning trend by both parties of politicizing the management of public pension funds”.

‘BlackRock is not an activist investor: it does not file shareholder proposals or seek to nominate directors for election to a company’s board,” Jane Moffat, Managing Director, US Government Affairs and Public Policy at BlackRock, wrote in the letter. “BlackRock Investment Stewardship does not act collectively with other shareholders or organizations in voting shares and does not rely on any proxy research firm’s voting recommendations. Nor does it dictate company strategy, as we view setting, executing, and overseeing strategy as the responsibility of management and the board.”

BlackRock, State Street and Vanguard are set to face a Texas-led antitrust lawsuit from 13 Republican states after a US judge declined to dismiss the vast majority of the counts in the case last month, as reported by Minerva Analytics. This is despite BlackRock being removed from Texas’ blacklist after paring back its climate policy, including its high-profile departure from the Net Zero Asset Managers initiative at the start of 2025. BlackRock is also a Texas Stock Exchange shareholder.

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Last Updated: 18 September 2025