Proxy Advisors Face Heat from Executive Order, AI Adoption

The proxy-voting ecosystem is entering an unprecedented period of disruption. A Trump administration executive order, JPMorgan’s artificially intelligent voting, and sweeping policy changes from ISS and Glass Lewis are reshaping governance norms. In short, boards and management can expect tighter regulatory oversight, diminished influence of traditional proxy advisors, and a surge in tech-driven, customized voting frameworks.

Executive Order Targets DEI, ESG

In December 2025, President Donald Trump issued an executive order directing federal agencies to tighten oversight of proxy advisory firms—specifically naming ISS and Glass Lewis. A White House statement alleged the advancement of politically motivated agendas, particularly around diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) issues.

The executive order instructs the Securities and Exchange Commission, the Department of Labor, and the Federal Trade Commission to review and, if inconsistent with the administration’s priorities, potentially rescind any rules or guidance that support DEI or ESG considerations in proxy advice and shareholder proposals. It also calls for enhanced transparency in proxy advisor methodologies, increased enforcement of anti‑fraud provisions for voting recommendations, and an exploration of whether proxy advisors should register as investment advisers.

While the order may not immediately alter the 2026 proxy season, analysts noted that it is expected to influence future regulatory direction and accelerate the industry shift from standardized “benchmark” voting recommendations to more tailored approaches.

JPMorgan Launches ‘Proxy IQ’

In a major development, JPMorgan Asset & Wealth Management will cut ties with external proxy advisors in the U.S. and instead rely entirely on a new in‑house artificial intelligence platform, Proxy IQ. The development, first reported by The Wall Street Journal, was confirmed in internal communications cited by multiple news outlets.

The asset manager stated in a memo, obtained and reported by Pensions & Investments, that it will now aggregate and analyze proprietary data from more than 3,000 annual company meetings using machine learning and generative AI.

Other large asset managers—including State Street Global Advisors, Vanguard, and BlackRock—offer customized voting options to some of their investors.

Competitors such as Broadridge Financial Solutions, which sells end-to-end shareholder communications services, began iterating a machine-learning and AI-enabled voting platform in 2021.

ISS, GL Finalize ’26 Voting Policies

For those without access to a proprietary voting platform, ISS and Glass Lewis finalized their 2026 policy updates, which apply to shareholder meetings this year. The updates include the most extensive revisions seen in years and reflect both evolving investor expectations and the heightened regulatory climate.

ISS’s finalized policy updates include major adjustments to executive compensation analysis, capital‑structure assessments, and responsiveness criteria:

• Extended pay‑for‑performance horizons: ISS will expand quantitative pay‑for‑performance tests from three to five years across several screens, including its Relative Degree of Alignment and Financial Performance Assessment (See related story, “Resurrecting History: ISS Lengthens ‘Look-backs’ for P4P Tests“)
• Revised CEO pay metrics: The Multiple of Median test will incorporate both one‑ and three‑year assessment periods for CEO pay relative to peers
• Capital‑structure scrutiny: ISS will generally recommend voting against directors at companies with unequal voting rights across share classes, further strengthening its prior stances on governance structures
• More flexible equity plan evaluation: The Equity Plan Scorecard now includes additional scored and overriding factors, with greater emphasis on the long‑term structure of time‑based equity awards
• Greater accountability on director pay: ISS broadened its authority to recommend against directors over “excessive” or “problematic” non‑employee director compensation, and no longer requires the pattern to be consecutive

Glass Lewis also released extensive updates affecting multiple areas of corporate governance:

• Enhanced pay‑for‑performance methodology: Updates include refined methods for linking pay with performance and expanded considerations of long‑term compensation structures
• Shareholder rights and governance provisions: Adjustments were made to how Glass Lewis assesses supermajority vote requirements, charter/bylaw amendments, and shareholder proposal exclusions
• Mandatory arbitration and ESG proposals: New guidance clarifies how arbitration provisions and environmental/social proposals will influence recommendations
• Shift toward customized voting frameworks: In a major structural shift previously reported by Farient, Glass Lewis announced plans to retire its uniform benchmark recommendations by 2027 in favor of client‑specific, AI‑enabled voting frameworks—a direction foreshadowed by broader market moves such as JPMorgan’s adoption of AI‑based tools

Farient’s View

Proxy advisor influence may be shifting, but it is not disappearing. Despite high‑profile criticism and political pushback, proxy advisors still heavily shape investor voting outcomes. Farient maintains that ISS and Glass Lewis’ annual policy updates remain valuable early signals of voting behavior for compensation, board composition, and shareholder rights. Boards cannot ignore ISS/GL simply because public sentiment has turned against “woke capitalism”—their influence on most institutional investors remains intact.

• AI will continue to disrupt proxy advisory models. New technology will continue to alter how proxy guidance is produced and followed, with GL already customizing policies using AI. This suggests emerging fragmentation of influence and new competitive pressures for traditional advisors
• Companies should expect greater scrutiny of compensation structures. ISS is targeting executive compensation more aggressively in 2026, including longer‑term P4P tests and tighter standards for director pay. Glass Lewis’s P4P methodology overhaul also increases the likelihood that companies will be flagged even if they previously passed. Boards should prepare for tougher evaluations and the need to justify any deviations from norms
• Special awards and unique circumstances will face higher bars. Proxy advisors tend to favor companies that commit to disciplined use of special awards, with clear performance measures and transparent rationale. In the upcoming season, companies granting discretionary awards (e.g., leadership transitions) must articulate necessity and performance linkage to avoid negative recommendations
• Clear, accurate disclosures remain a strategic advantage. Proxy advisors work entirely from public disclosures—so inaccuracies or unclear narratives in company disclosures can trigger unfavorable outcomes. In the current politicized environment, companies should prioritize value-based frameworks and factual, investor‑oriented messaging to reduce misinterpretation and controversy