Proxy Advisors Under Artificial Intelligence: Unverified Reasoning in Shareholder Voting Recommendations

Abstract

Proxy advisory firms exert considerable influence in corporate governance by issuing voting recommendations to institutional investors. Despite their growing impact on shareholder decisions and company practices, these firms remain opaque about how their recommendations are formulated. This paper examines how the actual or potential use of AI in proxy advisory services may reshape existing concerns about transparency, undue influence, and conflicts of interest. While AI is currently used in preparatory processes such as information extraction and classification, its deeper integration could exacerbate existing concerns and introduce new risks by weakening institutional accountability. Still, AI offers benefits in efficiency and evaluative consistency, making it necessary to consider how these advantages can be harnessed responsibly within proxy advisory functions. This paper argues that effective AI governance requires both internal and external safeguards, and sets out institutional conditions for the responsible integration of AI into proxy advisory services.