The Decline of Proxy Advisory Firms and the Rise of AI-Driven Governance: JPMorgan's Break with ISS and Glass Lewis Signals a Shift in Corporate Control and Investor Power

The corporate governance landscape is undergoing a seismic shift, driven by JPMorgan Chase's unprecedented decision to sever ties with proxy advisory giants Institutional Shareholder Services (ISS) and Glass Lewis. This move, announced in 2025, marks the first time a major asset manager has fully replaced external proxy advisors with an in-house AI-powered platform, Proxy IQ. By doing so, JPMorgan has not only challenged the long-standing influence of proxy advisory firms but also signaled a broader transformation in how corporate control and investor power are redefined in the age of artificial intelligence.

The Catalyst: Criticism, Regulation, and Technological Disruption

JPMorgan's decision follows years of criticism from corporate leaders, including its own CEO Jamie Dimon, who has repeatedly lambasted proxy advisors as "incompetent" and "biased" in their voting recommendations. Dimon's frustration reflects a broader sentiment among executives, who argue that proxy firms often prioritize ideological agendas-particularly around ESG (environmental, social, and governance) metrics-over shareholder value. This tension has been amplified by regulatory scrutiny under U.S. President Donald Trump, whose December 2024 executive order targeted proxy advisors' influence on corporate governance and ESG-related issues.

The regulatory environment has further eroded trust in proxy advisors. The SEC's Investor Advisory Committee, for instance, proposed mandatory AI disclosure requirements in 2025, including board oversight of AI deployment and its impact on operations. These developments have pushed firms like JPMorgan to seek alternatives that align with their strategic priorities while navigating a fragmented regulatory landscape.

Proxy IQ: Centralizing Power Through AI

JPMorgan's Proxy IQ platform, which aggregates data from over 3,000 annual company meetings, represents a bold experiment in AI-driven governance. By replacing human-driven proxy advisory services with an algorithmic system, the firm centralizes decision-making authority within its own ranks. This shift has profound implications for corporate control:

1. Reduced Intermediation: Proxy advisors traditionally acted as gatekeepers, interpreting complex governance issues for institutional investors. By bypassing these intermediaries, JPMorgan empowers its own analysts to make voting decisions, potentially aligning governance strategies more closely with its investment theses.
2. Speed and Scalability: AI enables real-time analysis of proxy materials, allowing JPMorgan to respond swiftly to governance controversies or shareholder proposals. This agility could give the firm an edge in influencing board dynamics and executive compensation packages.
3. Data-Driven Objectivity: While critics argue that proxy advisors lack transparency, JPMorgan claims Proxy IQ's algorithms are designed to minimize bias by relying on quantifiable metrics rather than subjective judgments.

However, this centralization of power also raises concerns. As AI systems become integral to governance, the opacity of their decision-making processes could undermine investor trust. The SEC's proposed AI disclosure rules-requiring companies to define AI systems and report board oversight-highlight the regulatory challenges of ensuring accountability in algorithmic governance.

Investor Power in the AI Era

JPMorgan's move reflects a broader trend: the reconfiguration of investor power through technology. By leveraging AI, the firm is not only streamlining its governance processes but also reshaping the balance of power between institutional investors, corporations, and regulators.

For example, JPMorgan's LLM Suite-a generative AI platform launched in 2024- demonstrates how AI can democratize access to sophisticated analytical tools within large organizations. With this platform, JPMorgan employees can generate investment banking materials in seconds, reducing reliance on junior analysts and accelerating decision-making. When applied to proxy voting, similar tools could enable more granular, data-driven engagement with portfolio companies.

Yet, this technological leap also risks concentrating influence in the hands of a few. Smaller asset managers, lacking the resources to develop in-house AI systems, may find themselves at a disadvantage in shaping corporate governance outcomes. This could exacerbate existing power imbalances, as larger firms like JPMorgan dictate governance norms through proprietary algorithms.

The Future of Governance: Centralization vs. Transparency

The rise of AI-driven governance tools like Proxy IQ underscores a critical tension: the need to balance efficiency with transparency. While AI offers unparalleled speed and scalability, its "black box" nature-where decision-making logic is opaque even to users-poses risks for accountability. This is particularly concerning in proxy voting, where shareholders expect clear rationales for voting choices.

To address these challenges, JPMorgan and other firms must adopt governance frameworks that ensure AI systems are auditable and aligned with investor interests. The emergence of AI governance platforms-such as Holistic AI and Credo AI- suggests that robust oversight is possible. These tools emphasize policy enforcement, bias mitigation, and compliance with standards like the EU AI Act, offering a blueprint for responsible AI deployment. According to reports, this approach could become the standard for future governance.

Conclusion: A New Paradigm in Corporate Control

JPMorgan's break with ISS and Glass Lewis is more than a corporate governance maneuver; it is a harbinger of a new paradigm where AI redefines investor power and corporate control. By replacing proxy advisors with an in-house AI platform, JPMorgan has positioned itself at the forefront of a technological revolution that promises both efficiency and risk.

As the 2025 proxy season demonstrated, this shift is already reshaping how institutional investors engage with companies. Yet, the long-term success of AI-driven governance will depend on whether firms can reconcile the benefits of automation with the need for transparency and accountability. In this evolving landscape, JPMorgan's Proxy IQ serves as both a model and a cautionary tale: the future of corporate governance will be written not just by algorithms, but by the frameworks that govern them.