JPMorgan Chase's asset management division has made a significant industry move by ending its reliance on third-party proxy advisory firms for U.S. shareholder voting. According to an internal memo seen by Reuters and The Wall Street Journal, the bank will instead utilize its newly launched internal artificial intelligence system called Proxy IQ. This system aggregates and analyzes proprietary data from more than 3,000 company meetings annually.
The decision marks an industry first for a major asset manager, signaling a sharp break from the long-standing market practice of using firms like Institutional Shareholder Services (ISS) and Glass Lewis. These firms have traditionally provided governance data and voting recommendations that influence trillions of dollars in investments on matters including director appointments, executive pay, mergers, and shareholder proposals.
JPMorgan's leadership, including longtime CEO Jamie Dimon, has been vocal in its criticism of proxy advisers, with Dimon previously labeling them as "incompetent" for their one-size-fits-all approaches. The move comes amid heightened regulatory scrutiny of the proxy advisory industry. Reports indicate the Federal Trade Commission (FTC) is investigating the sector for potential anticompetitive practices, and former U.S. President Donald Trump signed an executive order in December calling for tighter oversight, arguing leading firms often "advance and prioritize radical politically-motivated agendas."
The internal Proxy IQ platform leverages machine learning algorithms to process complex governance documents, financial reports, and regulatory filings. JPMorgan, which manages over $7 trillion in client assets through its asset and wealth management division, claims the AI tool will enhance efficiency, accuracy, and customization, allowing voting decisions to be more closely aligned with its specific investment philosophies and client mandates.
ISS defended its role after the news broke, stating, "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." Glass Lewis did not immediately comment.
Analysts warn that if other large asset managers like BlackRock or Vanguard follow JPMorgan's lead, it could significantly disrupt the $2 billion proxy advisory market and shift governance power directly into the hands of major fund groups. However, it also raises questions about transparency and the potential for new forms of opacity introduced by proprietary algorithms. For now, JPMorgan's move applies only to the U.S. market.
