JP Morgan drops proxy advisers, turns to AI

JPMorgan Chase’s asset-management business has made a major change by cutting all ties with proxy-advisory firms. It will use its own AI system, called Proxy IQ, to handle voting for US companies in the upcoming proxy season.

The unit manages more than $7 trillion in client money and votes on shareholder decisions at thousands of companies each year.

Proxy IQ will organize votes, study data from more than 3,000 annual shareholder meetings, and suggest how portfolio managers should vote. This move replaces the work usually done by outside proxy advisers.

JPMorgan says it is the first large investment firm to stop using external proxy advisers completely. Earlier, it had already stopped relying on them for voting recommendations and shifted that responsibility to its internal team.

Proxy advisers such as ISS and Glass Lewis help investors research company issues and manage large numbers of votes. However, critics say these firms have too much influence over corporate decisions and may face conflicts of interest. 

The Trump administration recently ordered regulators to review the industry.

ISS and Glass Lewis dominate the market, especially for smaller investment firms. JPMorgan’s move could encourage other large firms to rely more on in-house tools and less on proxy advisers.