Egan-Jones: Asset Managers Move Away from Structurally Conflicted Proxy Advisors

NEW YORK, Jan. 30, 2026 /PRNewswire/ -- Egan-Jones notes that a second large U.S. bank has announced that it is moving away from a major proxy advisor, underscoring growing concerns about structural conflicts in the U.S. proxy system. A small number of dominant firms now control multiple, incompatible functions: proxy advisory services, vote execution, corporate consulting, material distribution, and vote tabulation.

Because these firms are paid by misaligned parties (i.e., shareholders and management), these conflicts are not manageable through disclosure. The conflict arises from the revenue model. Stated simply, no one can serve two masters. As a result, investor confidence, corporate accountability, and long-term retirement outcomes are increasingly at risk.

The Conflicted Proxy System
This problem has three core dimensions: conflicted proxy advice, conflicted proxy plumbing, and excessive market concentration.

First, the proxy advisory market is dominated by two large firms. Both firms have significantly more corporate consulting clients than proxy advisory clients. In practice, this means the same organizations that recommend how shareholders should vote also sell services to the very companies subject to those votes, often on executive pay, governance structures, and shareholder engagement strategies. This is an unmanageable conflict of interest that cannot be cured by disclosures, firewalls, or Chinese walls.

Second, equally serious conflicts exist within the proxy plumbing infrastructure itself. Currently, a single firm controls well over 90% of all proxy material distribution and vote tabulation, giving it extraordinary influence over the mechanics of shareholder voting while serving issuers in a core operational role. Yet that same firm also offers proxy advisory services to shareholders, creating, yet again, an inherent conflict of interest. That conflict is further intensified by the firm's expansion into corporate consulting, advising issuers on the same governance and compensation matters that are subject to shareholder votes.

Third, these conflicts are being normalized and expanded. New entrants are increasingly adopting the same vertically integrated model. A newer entrant, initially confined to supporting pass-through voting infrastructure, has since moved into offering AI-driven proxy advisory services. Rather than increasing competition or independence, this trend deepens concentration and further embeds conflicts into the system.

What's Next?
In well-functioning financial markets, critical roles are separated to preserve checks and balances. Broker-dealers, asset managers, custodians, clearing firms, and exchanges do not perform each other's jobs. The proxy system should be no different: proxy material distribution, vote tabulation, proxy advisory services, and corporate consulting must be structurally separated. Firms operating across multiple layers of this ecosystem face irreconcilable conflicts. You cannot serve two masters.

The proxy system is central to U.S. capital markets and shareholder democracy. Failing to recognize and address these structural conflicts threatens market integrity, discourages public company participation, and jeopardizes the retirement savings of millions of Americans.

About Egan-Jones Proxy Services
Egan-Jones Proxy Services was established in 2002 to provide shareholders with independent, objective, and accurate proxy voting advice. Egan-Jones is the only major independent proxy advisor in the U.S. and is known for providing its clients with voting advice based on their own priorities, rather than based on a conflicted or misaligned benchmark policy.

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SOURCE Egan-Jones Ratings Co.