AI Takes on Proxy Advisors

It looks like proxy advisors may be able to join the growing number of white-collar workers fretting over potential obsolescence thanks to artificial intelligence.

That may sound like an overreaction to the news that one financial services provider is turning to an AI platform for assistance on proxy votes this year. But when you consider the company in question is JP Morgan, the investment firm with more than $7 trillion in assets under management, it doesn’t seem so far-fetched.

According to a report from The Wall Street Journal, JPMorgan will begin using Proxy IQ in 2026, an AI-driven platform designed to evaluate proxy votes at U.S. companies. Based on data from thousands of annual shareholder meetings, the bank’s internal platform will make recommendations on how portfolio managers should vote on measures put forward for stockholder approval. JPMorgan intends to end its relationships with proxy advisory firms as a result.

That JPMorgan would be one of the first investment houses to ditch proxy advisory firms comes as little surprise. Jamie Dimon, JPMorgan’s well-known chief executive, has become an outspoken critic of proxy advisors such as Glass Lewis and Institutional Shareholder Services (ISS). Dimon and like-minded opponents insist advisory firms hold too much sway over shareholder votes. Moreover, critics maintain proxy advisors operate under business models that give rise to conflicts of interest.

The push against proxy advisory firms has a powerful ally in Republican President Donald J. Trump. Trump signed an executive order last month charging firms in the sector with trying to “advance and prioritize radical, politically motivated agendas.” Glass Lewis and ISS maintain they act appropriately in their advisory capacities.

For its part, the Securities and Exchange Commission doesn’t appear overly concerned about AI playing a larger role in proxy voting. Brian Daly, director of the Division of Investment Management at the SEC, has said AI tools provide “a compelling opportunity” to address “the scale and complexity of proxy voting.” The agency’s laissez-faire approach to AI marks a break from the position of previous leadership: Gary Gensler, the Biden administration’s appointee as SEC chair, cautioned that AI-fueled data analysis of proxy proposals could introduce systemic risk into the financial system. The current SEC regime does appear wary of AI’s potential effects on investing and financial markets, however. For instance, a new division inside the agency is evaluating the accuracy of how companies describe the ways in which they use AI in their own businesses.

But unless regulators grow more hostile toward applications of machine learning inside companies, AI appears poised to have a profound effect on corporate governance and compliance. Observers point out that AI could relieve some of the strain on compliance teams taxed by regulatory systems rife with complexity and constraints on resources. And if AI can streamline processes to cut more of the manual burden, compliance professionals could potentially take on more strategic roles within companies.

All of which raises a compelling question about the future of corporate governance: Can AI-powered proxy advisors properly evaluate AI-centric shareholder proposals? Talk about a conflict of interest.

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