Investment bank JPMorgan Chase (JPM) is ditching the use of proxy advisory firms and replacing them with its own AI platform in an industry first.
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According to an article in the Wall Street Journal, JPM’s asset management unit will no longer work with proxy advisory firms ahead of upcoming shareholder meetings.
JPM Prefers AI Advice
This coming proxy season, which usually starts in March and continues through June, the bank will instead start using an internal artificial-intelligence-powered platform called Proxy IQ, for recommendations on shareholder votes in other firms. It is expected to manage votes as well as “analyze data from more than 3,000 annual company meetings” to replace the work done by advisory companies.
Proxy advisory firms such as Glass Lewis and ISS review shareholder proposals and corporate governance concerns and issue voting recommendations to institutional investors ahead of annual shareholder meetings.
Their advice can be pivotal in determining the outcomes of board elections, executive pay decisions and environmental or social resolutions.
Proxy Firms Should Die
JPM chief executive Jamie Dimon has been very vocal in the past about how “ineffective” proxy advisory firms are. Last year he was reported as saying that proxy firms were “incompetent,” that they have conflicts of interest and don’t do adequate due diligence.
He said: “They are owned by non-governmental organizations. Their data is wrong, yet they don’t have to correct them. And companies ‘can hire them’ to improve their corporate governance ratings. ‘Really? They should be gone and dead, done with.”
Other businesses have for years raised a range of complaints about proxy advisers and large fund managers, arguing that they often recommend votes against boardroom decisions or directors and place too much emphasis on climate and social issues.
In December, U.S. President Donald Trump signed an executive order aimed at increasing oversight of the proxy advisory industry, on the grounds that top firms often “advance and prioritize radical politically-motivated agendas.”
Glass Lewis and ISS have repeatedly denied any wrongdoing on the allegations.
Is JPM a Good Stock to Buy Now?
On TipRanks, JPM has a Moderate Buy consensus based on 10 Buy and 8 Hold ratings. Its highest price target is $391. JPM stock’s consensus price target is $336.83, implying a 0.66% upside.
