JPMorgan Will No Longer Work With Proxy Agents

JPMorgan Chase added to what has already been a hard year for proxy advisers by stating that it would no longer use the services of firms such as Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co., which together hold a virtual duopoly in the business of advising fund managers how to vote at shareholder meetings. 

In an internal memo, JPMorgan stated that its asset management division will instead use an internal artificial intelligence-powered program to help determine how to vote the shares it owns. The program, called “Proxy IQ,” will analyze corporate voting issues across more than 3,000 annual shareholder meetings. 

Although JPMorgan did not publicly detail the reasons for this move, CEO Jamie Dimon, in his 2024 letter to shareholders, cited problems created by “misguided proxy advisors” as one of the reasons fewer companies are willing to list on public exchanges.  

Critics have alleged that ISS and Glass Lewis, which collectively account for more than 90 percent of the proxy advisory market, have leveraged their dominant position to push a left-wing agenda on corporations regarding issues like global warming and social justice. Many conservatives cheered the move by JPMorgan, which they believe will reduce the influence of ISS and Glass Lewis.

“It’s a very significant victory for, and a validation of, the efforts of conservative shareholder advocacy groups,” William Flaig, co-founder of the American Conservative Values ETF, told The Epoch Times. “Before ISS and Glass Lewis were hijacked by the woke liberal ESG agenda, they did provide a valuable service of consistently applied reasoning to governance and independence, but those days are long gone.”

JPMorgan’s action follows an executive order by President Donald Trump on Dec. 11, which said that ISS and Glass Lewis “wield enormous influence over corporate governance matters” and “regularly use their substantial power to advance and prioritize radical politically-motivated agendas—like ‘diversity, equity, and inclusion’ and ‘environmental, social, and governance.’”

Trump’s order instructs the Securities and Exchange Commission (SEC) to revamp its rules regarding shareholder voting to discourage activists from using it to politicize corporate governance. It also instructs regulators to investigate ISS and Glass Lewis for alleged anti-trust activity, misleading consumers, and conflicts of interest.

In response to Trump’s order, ISS issued a statement that it was “committed to engaging constructively” with federal regulators and that the firm’s “research, voting policies, and vote recommendations are based on apolitical, thorough, independent, and objective analysis.”

Financial analysts, however, say that many fund managers will likely follow JPMorgan’s lead. 

“Heightened scrutiny from the Trump Administration and the SEC is forcing asset managers to rethink their reliance on proxy advisory firms, and JPMorgan’s decision to step away from ISS and Glass Lewis is likely a new reality for large asset managers,” Derek Kreifels, CEO of Prospr Aligned, a corporate engagement consultancy, told The Epoch Times.

Referencing a “growing skepticism about the role proxy advisory firms play in shaping voting outcomes across public markets,” Kreifels said that “large asset managers are reassessing whether continued reliance on proxy advisory firms aligns with their fiduciary obligations, especially as ESG and DEI-driven frameworks face heightened scrutiny from the Trump administration, and particularly the SEC.”

In February, Acting SEC Chairman Mark Uyeda reversed a Biden-era policy regarding activist shareholder voting, and issued new guidance that made it easier for companies to reject shareholder proposals that focus primarily on issues of “social significance.” This guidance targeted what had for decades been a significant lever for political and environmental activists to compel companies to implement diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) policies. 

“The proxy voting landscape has changed drastically in the last year,” Flaig said. “The SEC has made it easier for companies to exclude shareholder proposals, and as a result, I would expect to see far fewer proposals from both liberal and conservative advocates on proxy ballots the next few proxy seasons.”

ISS and Glass Lewis did not respond to requests from The Epoch Times for comment. However, ISS said in a statement to Reuters, “We are proud of our four-decade record serving the global institutional investor community with independent and high-quality governance research, recommendations, and voting solutions, and will continue to do so.”