JPMorgan ditches proxy firms

It may be the height of cuffing season, but JPMorgan is dumping proxy advisors.

The Wall Street Journal reported today that the legacy firm’s asset management unit is fully abandoning the controversial practice of using third-party firms to collect data and give voting recommendations on proposals like mergers, executive compensation, and ESG-related issues.

Instead, it’s replacing independent research firms with—you guessed it—an in-house AI platform dubbed Proxy IQ, which JPMorgan says will analyze proxy data from 3,000 company meetings and provide recommendations to portfolio managers.

The Wall Street giant, which boasts roughly $7 trillion in client assets, will be the first major investment firm to ditch the proxy advisor system, according to the WSJ.

The beginning of the end

Third-party proxy advisory companies like Institutional Shareholder Services and Glass Lewis analyze corporate governance data, recommend how shareholders should vote, and even provide asset managers with voting infrastructure.

This system was developed in response to the growing complexity of how modern capital markets work. Over the past few decades, primary ownership of public firms shifted from individuals to institutions like mutual funds, pensions, and index funds. This all came at the same time that corporate ballots became increasingly technical and confusing. That made voting every proxy on a shareholder proposal a logistical nightmare—hence the rise of proxy advisory firms in the 1980s that simplified the process.

Outsourcing voting power has always been a double-edged sword. Critics have long argued that the proxy advisor system gives a few firms too much power to effectively make major decisions for companies they don’t technically own themselves.

But over the past year, conservatives and the Trump administration have made proxy advisors a top target, blaming them for the rise of ESG. In December, President Trump signed an executive order calling for antitrust regulators to investigate proxy advisors, and claimed they “regularly use their substantial power to advance and prioritize radical politically-motivated agendas.”

Influential CEOs have turned up the heat, as well. Elon Musk, for example, called proxy advisors “corporate terrorists” after Institutional Shareholder Services recommended Tesla shareholders reject his $1 trillion pay package. And JPMorgan CEO Jamie Dimon himself has raged against proxy advisors, saying last spring at an event that they should be “gone and dead.”

Today, he took the first step toward making that a real possibility.—LB