Texas’ high-profile fight with proxy advisory firms is often described as another skirmish in the ESG wars. That framing misses the point and obscures the real governance risk now facing Texas-incorporated and Texas-based public companies.

The US District Court for the Western District of Texas is considering a challenge to a recent Texas statute regulating proxy advisory firms. Senate Bill 2337, passed in 2025 and codified in the Texas Business Organizations Code (Chapter 6A), requires firms that advise institutional investors how to vote their shares to make state-mandated disclosures.

In particular, the disclosures should come when recommendations diverge from management or rely on so-called nonfinancial considerations—effectively conditioning proxy advice on how it is expressed.

The proxy adviser statute now tied up in federal court isn’t a disclosure rule; it’s a speech regulation. And that distinction explains both why the law has struggled in court and why, even if revived, it would complicate rather than strengthen corporate governance.