JPMorgan's Break with Proxy Advisory Firms: Investment Analysis

Based on my comprehensive research, I can now provide a detailed analysis of JPMorgan’s decision to cut ties with proxy advisory firms and its investment implications.

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JPMorgan Chase’s asset management unit has announced a decisive break from proxy advisory firms ISS and Glass Lewis, effective immediately, marking a pivotal moment in the evolution of U.S. corporate governance [1]. This decision, announced via internal memo on January 7, 2026, positions JPMorgan as the first major U.S. bank to sever ties with these dominant governance advisors and signals a broader institutional shift away from traditional proxy advisory models. The move comes amid heightened regulatory scrutiny following a December 2025 Executive Order targeting proxy advisory firms and reflects growing corporate dissatisfaction with perceived ideological bias in proxy recommendations [2][3].

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Institutional Shareholder Services (ISS) and Glass Lewis collectively control approximately

, serving as the primary voting recommendation source for institutional investors who own roughly 70% of U.S. public equities and cast 91% of voted shares [4]. This market concentration has drawn sustained criticism from corporate America and conservative policymakers, who argue these firms exert disproportionate influence over corporate governance outcomes, particularly regarding executive compensation and ESG-related proposals.

Research demonstrates the substantial impact of proxy advisor recommendations on institutional voting behavior:

Governance Issue	Impact of Negative Recommendation
General Issues	15-30% reduction in favorable votes
Say-on-Pay Votes	95% support when ISS recommends “for” vs. 68% when opposed
Equity Plans	17% reduction in institutional support
Proxy Contests	73% increase in support when ISS backs dissident slate

This influence extends beyond voting patterns to actual corporate governance decisions—

report reviewing proxy advisor policies or directly engaging with ISS and Glass Lewis to shape executive compensation structures, with 32% altering disclosure practices and 24% reducing severance benefits specifically to align with proxy advisor guidelines [4].

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JPMorgan Asset Management’s decision encompasses the following critical components:

1. Immediate Termination
   : All ties with proxy advisory firms cut effective immediately
2. Internal Alternative
   : Deployment of
   Proxy IQ
   , an AI-powered proprietary voting platform developed internally
3. Timing
   : The 2026 proxy season (March-June) will be the first conducted without external proxy advisor input
4. Scale
   : JPMorgan manages approximately
   $3.2 trillion in assets
   under management, making this a watershed moment for the industry

Jamie Dimon has been a vocal critic of proxy advisory firms for years. In May 2025, he publicly characterized these firms as a

on the corporate governance system and advocated for their elimination [5]. The 2026 decision represents the culmination of this longstanding opposition and positions JPMorgan as a leader in the movement toward internalized governance assessment.

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President Trump signed an Executive Order on December 11, 2025, titled

, which has fundamentally altered the regulatory landscape [2][3]. The Order specifically targets:

• ISS
  : Characterized as German-owned through its 2021 merger with Egan-Jones Ratings
• Glass Lewis
  : Identified as Canadian-owned via its ownership by Canadian Pension Plan Investment Board

The Executive Order directs multiple agencies to intensify scrutiny:

Agency	Mandated Actions
SEC	Review proxy advisor rules, consider enforcing anti-fraud provisions, require RIA registration, enhance transparency requirements
FTC	Investigate anticompetitive practices, conflict disclosure inadequacies, and deceptive information
DOL	Review ERISA regulations to classify proxy advisors as fiduciary entities
Justice Department	Coordinate state antitrust investigations

The Order explicitly frames proxy advisory firms as entities that

—particularly regarding DEI and ESG initiatives—and calls for alignment of proxy recommendations with fiduciary financial duties rather than non-pecuniary factors [2][3].

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JPMorgan’s departure represents a potential

for the proxy advisory industry. If other major asset managers follow suit:

• Revenue Pressure
  : ISS and Glass Lewis could face significant revenue erosion as institutional clients reassess the value proposition of external proxy advice
• Business Model Evolution
  : Both firms have already begun adapting—ISS launched customized research services (Gov360, Custom Lens), while Glass Lewis announced that 2026 is the final year for its standard Benchmark Policy, with client-tailored alternatives forthcoming [6]
• Regulatory Consolidation
  : Increased compliance costs from RIA registration requirements may further compress margins and force industry consolidation

The JPMorgan decision, combined with regulatory pressure, is reshaping governance outcomes:

: Historically, ISS and Glass Lewis recommendations counterbalanced index fund pro-management votes in proxy contests. Diminishing proxy advisor influence may:

• Reduce settlement value for activist campaigns
• Shift the calculus for companies considering activist engagement
• Increase the importance of direct investor outreach over third-party recommendations

: The retreat from blanket ESG/DEI support creates a more favorable environment for compensation structures that proxy advisors previously penalized:

• Extended vesting periods and long-term retention awards may receive more favorable treatment
• Pay-for-performance assessments will incorporate longer time horizons (ISS extended from 3 to 5 years) [7]
• Companies may regain flexibility in designing compensation programs

: Both ISS and Glass Lewis have shifted ESG proposals to , replacing automatic “vote for” guidance and signaling reduced support for climate, diversity, and political spending proposals [7].

Asset managers face three strategic pathways:

Pathway	Description	Implications
Internal Development	Build proprietary voting capabilities (JPMorgan model)	High fixed costs, requires AI/technology investment, but full control over methodology
Hybrid Models	Combine internal research with selective proxy advisor use	Maintains some external validation while preserving flexibility
Complete Disengagement	Vote in-house without third-party input	Maximum autonomy but may face client/fiduciary questions about governance rigor

lacking resources for proprietary systems may face the most significant challenges, potentially accelerating industry consolidation among governance research providers.

Several sectors face material implications from the shifting governance landscape:

Sector	Likely Impact
Governance Services	Negative—ISS, Glass Lewis face revenue pressure; potential M&A activity
ESG-Focused Companies	Mixed—reduced proxy advisor support for social proposals may increase voting against certain initiatives
Executive Compensation Services	Positive—companies gain flexibility in compensation design
AI/Governance Technology	Positive—demand for internal proxy voting platforms accelerates
Corporate Defense Advisors	Neutral to Slightly Negative—reduced proxy advisor support for activists may decrease contested situations

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: Additional major asset managers (potentially including BlackRock, Vanguard, or State Street) announce partial or complete reductions in proxy advisory dependence within 12-18 months. ISS and Glass Lewis successfully transition to hybrid/customized models. The industry adapts but with significantly reduced market concentration.

: Broad-based institutional adoption of internal governance capabilities triggers a renaissance in differentiated, research-driven proxy voting. Companies benefit from more nuanced governance assessments rather than standardized recommendations. Corporate governance quality improves as voting decisions reflect deeper fundamental analysis.

: Regulatory overreach creates legal uncertainty that paralyzes institutional voting processes. Companies face fragmented and inconsistent governance expectations. Shareholder activism increases as institutional investors pursue individual agendas without third-party guidance.

1. Additional Institutional Departures
   : Watch for announcements from other major asset managers in Q1-Q2 2026
2. SEC Rulemaking Timeline
   : Anticipated Q1 2026 guidance on proxy advisor registration and compliance requirements
3. ISS/Glass Lewis Business Model Evolution
   : Custom service launches and pricing changes
4. 2026 Proxy Season Outcomes
   : Voting patterns on ESG proposals, executive compensation, and contested director elections
5. Litigation Activity
   : Challenges to SEC proxy rules and enforcement actions under the Executive Order framework

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• Evaluate internal governance research capabilities before the 2027 proxy season
• Consider hybrid models that maintain selective proxy advisor engagement for specific vote categories
• Engage with portfolio companies directly rather than relying on third-party recommendations

• Review executive compensation structures for alignment with updated ISS/Glass Lewis policies (longer time horizons, pay-for-performance metrics)
• Prepare governance committee communications addressing shareholder rights proposals
• Develop direct institutional investor engagement strategies

• Assess technology investments required for internal proxy voting infrastructure
• Evaluate compliance obligations under potential RIA registration requirements
• Consider partnerships or acquisitions in the governance technology space

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JPMorgan’s decision to sever ties with proxy advisory firms represents a watershed moment in U.S. corporate governance, catalyzed by sustained criticism of proxy advisor influence and formalized through the December 2025 Executive Order. The move toward internalized governance assessment—powered by AI-driven platforms like JPMorgan’s Proxy IQ—signals a fundamental restructuring of how institutional investors exercise their voting responsibilities.

The investment implications are substantial: the proxy advisory industry faces an existential challenge to its business model, companies may regain flexibility in governance structures that proxy advisors previously constrained, and the broader ecosystem of corporate governance services is undergoing rapid transformation. While the long-term effects remain uncertain, the direction of travel is clear—the era of standardized, third-party proxy voting recommendations is giving way to a more fragmented, technology-driven approach that promises both greater autonomy and increased complexity for institutional investors.

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[1] Reuters - “JPMorgan Chase cuts ties with proxy advisory firms, WSJ reports” (https://www.reuters.com/business/finance/jpmorgan-chase-cuts-ties-with-proxy-advisory-firms-wsj-reports-2026-01-07/)

[2] Dentons - “Implications of New White House Executive Order on Proxy Advisory Firms” (https://www.dentons.com/en/insights/alerts/2025/december/12/implications-of-new-white-house-executive-order-on-proxy-advisory-firms)

[3] Harvard Law School Forum on Corporate Governance - “Executive Order Targeting ISS and Glass Lewis: Impact on the 2026 Proxy Season and Beyond” (https://corpgov.law.harvard.edu/2026/01/06/executive-order-targeting-iss-and-glass-lewis-impact-on-the-2026-proxy-season-and-beyond/)

[4] Manhattan Institute - “Proxy Advisory Firms: Empirical Evidence and the Case for Reform” (https://manhattan.institute/article/proxy-advisory-firms-empirical-evidence-and-the-case-for-reform)

[5] Pensions & Investments - “J.P. Morgan’s Dimon slams proxy firms as a ‘cancer,’ urges elimination” (https://www.pionline.com/esg/jamie-dimon-advocates-eliminating-proxy-advisory-firms-calling-them-cancer/)

[6] Mercer - “Glass Lewis final voting policy updates: Executive pay implications for 2026” (https://www.mercer.com/en-us/insights/total-rewards/executive-compensation/glass-lewis-final-voting-policy-updates-for-2026/)

[7] Gibson Dunn - “ISS and Glass Lewis Issue Proxy Voting Policy Updates for 2026” (https://www.gibsondunn.com/iss-and-glass-lewis-issue-proxy-voting-policy-updates-for-2026/)