Wells Fargo's wealth and investment management division has ended its relationship with proxy adviser Institutional Shareholder Services (ISS), according to a person familiar with the matter. The unit will no longer rely on recommendations from proxy advisory firms such as ISS when determining how to vote on shareholder proposals, and will instead deploy a new internal voting system.
The bank and ISS did not immediately provide comment in response to inquiries. The information has not been independently verified.
Criticism of proxy advisers has been voiced by conservatives and some business leaders, who argue that these firms - and large fund managers using their recommendations - sometimes push shareholders to vote against corporate boards or directors and place disproportionate emphasis on climate and social issues. Proxy advisory firms evaluate shareholder proposals and corporate governance matters, issuing voting recommendations to institutional investors prior to annual meetings.
The shift at Wells Fargo follows a move earlier this month by JPMorgan’s asset management division, which said it no longer plans to use proxy advisers in the United States. The series of changes coincides with heightened attention on the industry from regulators and policymakers.
In December, U.S. President Donald Trump signed an executive order aimed at increasing oversight of the proxy advisory industry, asserting that leading firms sometimes "advance and prioritize radical politically-motivated agendas." The proxy advisory industry has repeatedly denied that it engages in wrongdoing and maintains that its recommendations are independent and not biased.
Wells Fargo's decision shifts the mechanics of how shareholder voting recommendations will be generated for the bank's wealth and investment management clients, placing that responsibility within the firm. The longer-term effects on proxy advisory firms, institutional voting patterns, and corporate governance practices will depend on how other large asset managers and investors respond to similar developments.
Context limitations - Public details about the internal voting system and the precise timing or scope of the change have not been disclosed by the bank.