Americans face a high-stakes choice between two competing economic visions. One makes it easier to build, invest, and grow. The other puts government control ahead of free enterprise. New York City has already gone down the latter path, where a self-described socialist is in charge of the world’s financial capital. The riots in France show what happens when socialist ideas, like those pushed in New York City and other progressive redoubts, become national policy.
Across the country, Americans are expressing clear policy preferences by flocking to states that embrace economic freedom. From 2020 to 2025, Florida, Tennessee, and Texas collectively added 5 million new residents, while California, Illinois, and New York lost around 2 million, according to U.S. Census data.
The states gaining residents are following a different economic playbook from those losing them. California and New York are pursuing new taxes on capital. South Carolina is cutting taxes to attract it. The nation’s per capita leader in domestic migration from 2024 to 2025 is moving toward a flat income tax below 2%, building on successive tax cuts since 2022.
The contrast extends to affordability policy. New York City responds to all-time high housing costs in Manhattan with rent freezes that further constrain the city’s inadequate housing supply. Austin, Texas, took the opposite approach, easing restrictions on development, leading to the largest rent decline of any major metropolitan area in the country.
States like Texas offer businesses an alternative to socialist economic policies. But the threat to free enterprise isn’t limited to top-down government policies. Activists are increasingly using corporate governance to advance social and political agendas that are immaterial to shareholder value.
When families invest their retirement savings through pensions, mutual funds, or exchange-traded funds, professional fund managers typically vote on the shareholders’ behalf on matters affecting the companies in their portfolios. To guide those votes, fund managers often turn to proxy advisory firms, notably Institutional Shareholder Services (ISS) and Glass Lewis.
Over the past two decades, ISS and Glass Lewis have gained disproportionate control over hardworking Americans’ retirement savings, reaching an estimated 97% market share. They have pushed board votes to favor Environmental, Social, and Governance (ESG) principles and Diversity, Equity, and Inclusion (DEI) management quotas.
Consider Glass Lewis’ 2026 benchmark policy, which recommended opposing nominating committee chairs at Russell 3000 companies whose boards fell below its 30% gender-diversity threshold. They stated this threshold would support long-term shareholder growth, but it is not clear how. Fund managers who embrace demographic quotas should be prepared to explain why discriminatory policies — potentially violating civil rights law — serve investors better than selecting directors based on merit.
Many fund managers have become reliant on these firms’ recommendations, giving them outsized influence over voting decisions. When managers defer to outside advisers rather than exercise independent judgment, the advisers’ priorities can take precedence over shareholders’ financial interests.
The firm’s business models raise additional concerns. ISS runs a separate consulting arm, selling corporate services to the very companies they are supposed to assess on behalf of shareholders. This arrangement creates an obvious conflict of interest. Companies seeking favorable recommendations on future shareholder votes may have an incentive to purchase guidance from the proxy firm.
Finally, the two firms that have such an outsized influence on U.S. corporations and the wealth of millions of Americans are major purveyors of liberal ESG priorities.
ISS is wholly owned by Deutsche Börse, the German stock exchange operator, which called its acquisition of ISS “a logical step in our ESG growth strategy.” Glass Lewis is owned by Canadian private equity fund Peloton Capital Management. In December of 2020, Peloton Capital Management signed the UN Principles for Responsible Investment (PRI). This committed the company to “incorporate ESG issues into investment analysis and decision-making processes.”
The U.S. has a unique cultural ethos of innovation and risk-taking, and over the past two years, it has been at the global forefront of pushing back against harmful ESG and DEI mandates. Governance recommendations from firms operating in countries that don’t share those values directly undermine this culture.
States are beginning to push back against the influence of proxy advisory firms. Tennessee enacted legislation this year requiring public pension funds to disclose their use of proxy advisers and the recommendations those advisers provide. The law also restricts consulting relationships between proxy advisers and the companies they evaluate. Oklahoma adopted legislation aimed at ensuring that proxy advisory services used by public pension funds prioritize shareholders' financial interests.
Texas has gone further than perhaps any state in freeing companies to focus on serving their customers and shareholders rather than navigating ESG and DEI demands. The Lone Star State is home to a newly founded stock exchange, specialized business courts, and sweeping corporate law reforms that have helped draw companies including Tesla, SpaceX, Dell, and ExxonMobil to reincorporate there.
Specifically on proxy firms, Texas has also required the firms to disclose their advice, but they have also gone further in attempting to curtail the excessive influence of shareholders that proxy firms amplify. Key actions involve allowing businesses to opt into limits on shareholder proposals and frivolous lawsuits. These protections allow businesses to focus on their core business missions, further boosting the attractiveness of the state for firms.
The rest of the nation should follow in the footsteps of these states that are resisting the influence of this out-of-control proxy duopoly. The competition among states offers a powerful reminder that economic policy has consequences. Families can move, businesses can relocate, and capital can seek more favorable conditions. Preserving America's economic dynamism means protecting free enterprise from government overreach and unaccountable private gatekeepers alike.
