JPMorgan Opts for AI, Bypassing Proxy Advisors in US Shareholder Decisions

In a significant shift, JPMorgan Chase's asset and wealth management division is moving away from the conventional practice of relying on external proxy advisors for guidance in shareholder voting matters.

According to a statement from an internal memo obtained by Business Insider, JPMorgan claims to be the first influential investment firm to completely do away with external proxy advisors in their US voting process.

These adjustments to the proxy-voting system in the US are set to be fully operational by April 1, following a transition phase in the initial quarter of the year, as confirmed by a representative from JPMorgan Asset Management to Business Insider.

Initially reported by The Wall Street Journal, this strategic change accompanies JPMorgan's management of $7 trillion in client assets, which empowers them with the ability to make decisions in a multitude of shareholder matters, spanning across different governance issues beyond mere financial questions.

Using proxy advisory firms for data gathering, advice, and voting guidance is standard within the industry. However, this practice was criticized by the Trump administration, which enacted an executive order in December calling for heightened scrutiny of the proxy advisor sector.

Critics argue that proxy advisors frequently wield their influence to forward and emphasize radical political agendas, as highlighted in the executive order.

In stepping away from proxy firms, JPMorgan underlined its resolve to exclusively prioritize the best interests of its clients by leveraging its informational superiority, as stated in the memo.

Replacing external human advisors, the asset and wealth management segment is deploying an internally developed AI platform named Proxy IQ to aid in shareholder decisions, as per the memo.

JPMorgan communicated that Proxy IQ upholds the high standards of independent analysis previously utilized by its portfolio managers, research specialists, and stewardship teams on every vote. This in-house acumen will now navigate the entire voting process, including data gathering and research selection, down to the finest details.

This innovative tool is designed to compile and examine proprietary data from over 3,000 company meetings annually.

With a technology budget of $18 billion, JPMorgan's CEO Jamie Dimon has made it clear that he aims to lead in the AI technological competition.

Institutional Shareholder Services (ISS) and Glass Lewis, previous proxy advisory providers for JPMorgan and mentioned in the Trump administration's executive order last December, did not issue comments when approached by Business Insider.