Proxy advisers are typically used by asset managers to help institutional investors vote on proxy matters such as executive compensation, director policy, and stock returns. This is becoming increasingly important as firms are being asked to demonstrate their voting records to investors from an ESG and stewardship perspective.
However, Dimon – who has been CEO of the firm since 2006 – believes proxy advisers are providing too much of their own insight on how shareholders should vote and having an “undue influence” which asset managers can find difficult to overrule.
The firm’s voting guidelines state that portfolio managers always have the discretion to override the voting policy if individual circumstances dictate and are not obliged to follow a proxy’s decision if they have a contrary view.
Dimon said: “While asset managers and institutional investors have a fiduciary responsibility to make their own decisions, it is increasingly clear that proxy advisers have undue influence.
“Almost all asset managers receive proxy adviser data and recommendations; while some asset managers vote completely independently of this information, the majority do not. Most asset managers have formed corporate governance or stewardship committees that are responsible for their voting, and these committee positions are often held not by portfolio managers and research analysts (i.e. the people buying and analysing the individual securities) but by stewardship experts.
“While it is good to have stewardship experts, the reality is that many of these committees default large portions of what they do to proxy advisers and, more troubling, make it harder for actual portfolio managers to override this decision making.”
He said JPMorgan’s asset management business, JP Morgan Asset Management (JPMAM), is making enhancement to its proxy voting processes to amplify the role of individual portfolio managers and strengthen its client and company relationships. Giving portfolio managers a greater view will increase the diversity of viewpoints represented, Dimon added, as well as give management greater access to companies and the ability to raise critical issues with them.
“As part of this change and in recognition that portfolio managers, as fiduciaries, may differ in their views on how to vote on particular proposals depending on a mandate’s investment strategy and guidelines, we are broadening our capabilities to support voting results that may vary across our platform.
“By the end of 2024, JP Morgan Asset Management generally will have eliminated third-party proxy adviser voting recommendations from its internally developed voting systems.”
