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With each passing day, the 2026 proxy season gets more interesting (and not in a positive way for proxy advisory firms). On December 8, 2025, the Trump administration issued an executive order (the "Executive Order") addressing the influence that proxy advisors "wield" to promote "radical politically-motivated agendas" (read more here). The Executive Order instructed the Securities and Exchange Commission to evaluate its rules and guidance related to proxy advisors, and to consider requiring increased transparency on advisors' recommendations, methodology, and conflicts of interest, among other things.
Subsequently, on January 8, Brian Daly, Director of the SEC's Division of Investment Management, addressed proxy voting. Starting from the premise our markets are currently "in a place where retail and institutional investors are directly and indirectly supporting a system where an oligopoly of proxy advisors exercise influence over voting decisions for a large portion of the investment management industry," which "contributes to the de facto imposition of external political and social ideologies on U.S.-listed public companies through the proxy voting process," Mr. Daly argued that investment advisors and fund managers should be free to determine both when and how to vote. In his view, fiduciaries should be free to determine that proxy voting is not required by their investment program. Those that do vote should be empowered to use their judgment in doing so, as long as they have appropriate authority, especially when a vote reflects the fiduciary's personal views on a social or political matter.
Mr. Daly questioned whether, if an investment adviser routinely follows a proxy advisor's standard recommendations without independent consideration and analysis, the advisor has really satisfied its fiduciary responsibilities to a client. This inquiry aims right at the heart of proxy advisors' roles in the voting process; a negative answer would seem to imply that advisors should potentially not be involved in voting recommendations.
Mr. Daly also addressed AI, generally supporting its use in reviewing and assessing proxy statements and generating voting recommendations. However, he cautioned that "with great power comes great responsibility," stressing the need for training and human involvement.
Also this week, as reported in The Wall Street Journal on January 7, JPMorgan Chase ("JPMorgan") plans to use an AI-powered platform called "Proxy IQ" to assist with voting recommendations this year in lieu of relying on proxy advisory firms. The Journal noted that, according to a JPMorgan memo, "the bank will use the platform to manage the votes and the AI also will analyze data from more than 3,000 annual company meetings and provide recommendations to the portfolio managers, replacing the typical roles of proxy advisers." All told, between the Executive Order, Mr. Daly's remarks, and the ongoing court battle over Texas's Senate Bill 2337, which, if it survives litigation, will impose new regulations on proxy advisory firms (read more here), 2026 poses many challenges for proxy advisory firms.
Read Mr. Daly's remarks here and The Wall Street Journal article here.
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