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Jamie Dimon: “undue influence” from proxy advisors

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Jamie Dimon: “undue influence” from proxy advisors

Governance and control service

The world’s largest banker raises the issue: «While some asset managers vote completely independently, the majority do not»

April 15, 2024

FILE PHOTO: JPMorgan Chase CEO and Chairman Jamie Dimon gestures as he speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, U.S., December 6, 2023. REUTERS/Evelyn Hockstein/File Photo

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“Although asset managers and institutional investors have a fiduciary responsibility to make their own decisions, it is increasingly clear that voting advisors exert undue influence,” writes Jamie Dimon, the world‘s largest banker, chairman and CEO by JP Morgan. In short, who decides how to vote in companies controlled by asset managers and pension funds to which savers entrust their savings? Formally the funds but essentially – says Dimon in the letter to investors – two consultants on voting matters. «One is called Institutional Shareholder Services (ISS) and the second is called Glass Lewis. These voting consultants began by providing reams of data from companies to help their institutional investor clients vote on proxy matters (executive compensation information, stock returns, director details, policies, and so on). However, Dimon explains, they soon also began providing advice on how shareholders should vote on proxy matters. And, indeed, institutional investors typically cast their vote on an ISS or Glass Lewis platform, which often includes a clear statement of the advisory service’s position.”

Automatic decisions

The result is that «while some asset managers vote completely independently of this information, the majority do not»; vote by trusting the indications of proxy advisors on information that “many companies claim is often unbalanced and inaccurate”. A problem. Because if it is clear that it is “too difficult and too expensive to review the large number of delegations and delegation proposals” – a consideration in Dimon’s opinion “at the same time lazy and incorrect” -, it is equally true that if a decision is brought to the attention the members must take care of the members. A problem that is not at all American. The issue was raised in Italy by Francesco Gaetano Caltagirone in the Senate in the cost of the works for the approval of the Capital Bill. According to the Roman entrepreneur at the center of the proxy fight in 2022 for the appointment of the Generali board of directors, also decided by the intervention in favor of the List of the outgoing board of directors of ISS and Glass Lewis, the proxy advisor system «ends up putting in the hands of some consultancy organizations the future of fundamental Italian companies”.

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