SUPPORTING STATEMENT:
Controversy over proxy voting - especially over environmental, social, and governance (“ESG”) proposals - is regularly reported on, debated, and enshrined in state law.1
Much debate centers on financial intermediaries, such as JPM, and their role in casting votes on behalf of clients and beneficial owners. Every vote opens JPM to controversy, either for failing to adhere to ESG principles or being too “woke.”
JPM’s conflicts of interest open it to additional controversy. For example, JPM funds are included in retirement plans sponsored by other public companies. To maintain inclusion in those plans, it is incentivized to vote proxies for those companies in favor of management, irrespective of the interests of fund investors. JPM’s publicly filed fund voting records readily confirm a strong pro-management bias.2
The divergence between the interests of asset managers like JPM and their investors and clients is an issue that has been taken up at the highest levels of government. A proposed bill would require asset managers like JPM to pass votes through to investors under certain conditions.3 President Biden’s first veto was about consideration of ESG factors in retirement plans.4
The landscape has clearly shifted: JPM can no longer execute votes in clients' best interests (and avoid controversy5) without first soliciting their preferences6 on social, environmental, and governance topics.
Votes are now filed in machine-readable format, which makes it easier for clients to identify votes misaligned with their preferences.7 Reliance on traditional proxy advisors will only invite further scrutiny, as their conflicts of interests are scrutinized.8
JPM offers portfolio customization based on the “values, investment and tax needs” of clients,9 but not for proxy voting, a core advisor responsibility subject to fiduciary duties.10 In its commingled funds, JPM does not currently offer investors any voting choices.
Criticism of BlackRock, Vanguard, and State Street11 led to providing voting choices. However, these choices are denounced as limited and false choices due to overreliance on traditional proxy advisors.12 New technologies can address the challenge of tailoring proxy voting on important issues such as climate change, diversity, executive pay, and political expenditures to the unique preferences and values of each investor.13
Investors want a voice. Approximately 83% of investors, irrespective of age, life stage, or ideological bent, want managers to consider their preferences when voting on environmental issues.14
Vote to Ascertain Beneficial Owner Voting Preferences – Proposal [4*]
1 https://corpgov.law.harvard.edu/2023/03/11/esg-battlegrounds-how-the-states-are-shaping-the-regulatory-landscape-in-the-u-s/ 
2 https://www.sec.gov/Archives/edgar/data/763852/000143893423000396/BRDG4F_0000763852_2023.txt 3 https://www.sullivan.senate.gov/newsroom/press-releases/sullivan-introduces-index-act-to-empower-investors-and-neutralize-wall-streets-biggest-investment-firms 
4 https://www.nbcnews.com/politics/white-house/biden-issues-first-veto-congress-blocks-new-investment-rule-rcna72997 
5 https://www.npr.org/2023/03/22/1165127291/climate-change-activists-target-big-banks-divest-from-fossil-fuels; https://fortune.com/2023/01/03/kentucky-divest-financial-institutions-jpmorgan-chase-citigroup-blackock-fossil-fuel/
6 https://ssrn.com/abstract=4360428 
7 https://www.sec.gov/news/press-release/2022-198
8 https://www.texasattorneygeneral.gov/sites/default/files/images/press/Utah%20%26%20Texas%20Letter%20to%20Glass%20Lewis%20%26%20ISS%20FINAL.pdf , https://www.wsj.com/articles/blackrocks-false-voting-choice-proxy-esg-ballots-iss-glass-lewis-66652357?mod=opinion_lead_pos1 ; https://www.wsj.com/articles/proxy-advisers-errors-accf-study-glass-lewis-iss-sec-gary-gensler-431939c5 
9 https://am.jpmorgan.com/us/en/asset-management/adv/investment-strategies/separately-managed-accounts/ 
10 See 14 CFR 275.206(4)-6 and accompanying staff bulletins. 
11 https://ssrn.com/abstract=4580206 
12 https://www.wsj.com/articles/blackrocks-false-voting-choice-proxy-esg-ballots-iss-glass-lewis-66652357 
13 https://ssrn.com/abstract=4360428 
14 https://www.gsb.stanford.edu/sites/default/files/publication/pdfs/survey-investors-retirement-savings-esg.pdf