Shareholder Votes May Become More Predictable as Proxy Advisors Face Regulation, Lost Business

Proxy advisors are under pressure heading into the 2026 shareholder voting season, losing top-tier institutional investor clients and facing regulatory scrutiny, as Skadden writes on its website.

Both JPMorgan and Wells Fargo are reportedly severing ties with proxy advisory firms like Institutional Shareholder Services (ISS) and Glass Lewis to bring voting decision-making in-house and use new technology tools. Meanwhile, an executive order from last year targeting proxy advisor firms could further fragment the centralized voting ecosystem that boards and management teams have relied on for decades.

Voting outcomes could become harder to predict, and corporate governance strategy must adapt accordingly.

Proxy advisory firms grew to dominate shareholder voting by offering cost-effective research to institutional investors that were managing large, diversified portfolios. ISS and Glass Lewis together control roughly 90% of the proxy advisory market.

Their influence recently drew regulatory backlash from the Trump administration, which directed the Securities and Exchange Commission (SEC) and Federal Trade Commission (FTC) to consider rescinding proxy-related rules and to enforce anti-fraud provisions against advisory firms.

The White House is asking regulators to determine if institutional investors that rely on environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI) recommendations from proxy advisors rather than strictly pecuniary factors have breached their fiduciary duties.

Texas was ahead of the trend, enacting legislation in 2025 that requires proxy advisors to disclose when their recommendations are based on nonfinancial factors. A lawsuit has stalled enforcement.

Major institutions are internalizing their voting processes in response. JPMorgan is deploying proprietary AI tools. Wells Fargo is adopting a Broadridge-powered platform.

Glass Lewis is abandoning standard benchmark guidelines by 2027 in favor of client-specific recommendations.

AI adoption in proxy voting is increasing, but remains unproven at scale. Glass Lewis has cautioned that fully automated platforms currently lack the capacity for nuanced global analysis.

These developments have direct board governance implications for in-house counsel. Disclosure obligations should be reviewed and strengthened for clarity, as more votes will flow through internal and AI-assisted processes rather than a single advisory framework.

Shareholder engagement timelines should start earlier in the cycle. Companies should evaluate activism vulnerability in light of the changes. M&A-related governance disclosures should anticipate more varied, investor-specific scrutiny, rather than a predictable ISS or Glass Lewis house view.