Europe and US’s growing divergence on proxy voting reform
13 May 2026
Tahlia Kraefft explores how a widening gap in proxy voting reform between the two regions is creating fragmentation and forcing multinational firms to manage highly disparate systems
Image: dmytro/stock.adobe.com
Increasing Transatlantic divide
Widening and stark divergence between Europe and the United States on proxy voting reform is being pushed by conflicting approaches to sustainability, fiduciary duty, shareholder proposals, and the function of proxy advisors.
The US is facing substantially stricter oversight, on one hand, increasingly moving to curb environmental and social proposals and suppressing the authority of proxy advisors. Conversely, European regulators are shifting to modernise shareholder rights, extend political participation, and potentially standardise rigid stewardship rules.
The US Securities Exchange Commission (SEC) has retreated on mediating in no-action requests, enabling companies greater freedom to omit proposals, resulting in a decrease in the quantity of ESG proposals. Conversely in Europe, proposals are legally binding across many administrations and supervisory bodies are evaluating the Shareholder Rights Directive (SRD II) with the view to bolster as opposed to diminishing shareholder rights and engagement, with a SRD III expected to be put forward by late 2026.
ISS, a larger advisor in the US, has said it will cease suggesting voting for environmental and social (E&S) proposals, changing to a case-by-case review this year. European managers are prioritising systemic stewardship and demonstrating greater support for E&S proposals in contrast to their US equivalents. Europe is seeking increased integration of capital markets, enhanced transparency, with consultations to rectify SRFII to better the identification of shareholders.
Proxy voting reform today
Proxy voting has shifted to become a strategic pillar of corporate governance functioning as a core mechanism for shareholders to impact company decision-making, ensure director accountability, and preserve long-term investments.
Today, global asset managers operating US-Europe cross-border portfolios are facing high-risk, as they manage complex regulatory fragmentation including EU’s Undertakings for Collective Investment in Transferable Securities, Alternative Investment Fund Managers Directive, and US’s SEC rules. Proxy advisors are seeking to address this split through abolishing universal recommendations and opting for personalised, region-specific voting, set to become guidelines by 2027.
Global asset managers are experiencing high stakes, such as potential mandates, terminations, and reputational risk as a result of these cross-jurisdictional divides, with European asset managers having ended mandates of US asset managers who fail to comply with rigorous European ESG stewardship standards.
Europe — harmonisation and intricacy
Proxy voting reform in Europe is prioritising enhancing transparency, digital efficiency, and client guided pass-through voting to attain improved stewardship standards.
Key reforms are set on curbing fragmentation across member states, ramping up scrutiny of proxy advisors, and allowing asset owners to have authority voting on ESG concerns.
Large European asset managers such as DWS and Legal & General are progressively permitting clients in pooled funds to direct votes using tools they have introduced. Pass-though voting adoption, enables investors to choose customised voting policies compared to depending on a single, standardised method.
Continuing reviews of the EU’s Shareholder Rights Directive II (SRD II) seek to address national fragmentation in proxy channels. The latest consultation on the SRD II framework is concentrating on refining regulations on vote transparency, shareholder identification, and the likely requirement to fix the five per cent threshold for lodging proposals.
Peter Reali, senior vice-president and general manager, Institutional Governance, Broadridge, remarks: “There is renewed momentum behind harmonisation in Europe at the policy level, but the picture on the ground remains mixed.
“Good examples are the Capital Markets Union and the European Commission’s latest call for evidence on the evaluation and review of the SRD II, which signals that shareholder rights, transparency in the intermediary chain, and the functioning of cross-border voting remain active policy priorities at EU level.
Simultaneously, implementation has been inconsistent, and the market continues to face meaningful national variation according to Reali.
“So the answer is really that both dynamics are happening at once: the EU continues to push toward greater harmonisation, but operationally there is still fragmentation because member states have applied the framework differently and market practices continue to vary across jurisdictions.”
An Investment Company Institute (ICI) spokesperson says the European Commission’s review of the SRD is the focus point of EU discussion around reform. “That framework governs the exercise of shareholder rights in listed companies and is primarily aimed at improving shareholder identification, communication, and participation across borders within the EU.
In ICI’s view, the SRD framework is functioning well and has delivered meaningful improvements in these areas. If the Commission were to consider adjustments, they should be narrow, evidence?based, and carefully targeted to focus on reducing remaining inefficiencies and preserving effective information flows and cross?border voting, rather than reopening the framework more broadly.”
SRD II created a clear directional consensus, according to Sarah Wilson, Minerva Analytics CEO, which includes: shareholder identification, vote confirmation, engagement transparency, intermediary obligations to facilitate ownership, not just exchange.
“The Listing Act, ESMA’s reviews, and the broader Capital Markets Union agenda continue in the same direction. There is genuine appetite for further convergence at the messaging, disclosure, and post-trade layer.
“But. There is a real lack of joining up across a whole raft of regulations. Plus, the European Union is not going to produce a uniform companies act any time soon. The treaties preserve member-state competence over company law and the political appetite for ceding that competence has never really existed. The cultural diversity it reflects is itself part of the European settlement itself, whether that’s Germany’s two-tier board, France’s loi PACTE, the Netherlands’ stakeholder jurisprudence, the Nordics’ nomination-committee tradition, and the UK’s now-distinct stewardship code are different models, each sitting in different bodies of national law that govern the actual mechanics of voting.”
Wilson explains that this condition is not unique to Europe: “The US is structurally similar: 50 state corporate-law regimes, with Delaware’s long dominance now under active competitive pressure from Texas, including a new Business Court, high-profile reincorporations, and a state-backed exchange.
“So, the right framing is pluralistic harmonisation: a shared direction of travel at the operational and disclosure layer, layered over genuinely different national legal and cultural conceptions of what a shareholder is for. For global investors, “harmonisation in Europe” should not be read as “one European regime emerging.” It is many regimes becoming more interoperable while staying substantively distinct.
Heightened scrutiny of proxy advisors including Glass Lewis and ISS is resulting in amendments to how voting recommendations are created, particularly regarding separating services, and targeting possible conflicts of interest.
The majority of European asset managers (80 per cent) continue to vote in support of environmental and social proposals. Glass Lewis is moving toward custom voting systems with plans to stop providing general benchmark rules by 2027, as it accounts for diverging cross-jurisdiction ESG approaches. Greater investor engagement has resulted in increased turnout at annual general meetings and there has been a take up of more automated voting systems to oversee the larger volume.
Wilson says Europe is not religating its first principles,
“Cross-party support for stewardship and disclosure has held up through multiple election cycles. Reforms are incremental and closely debated by market participants. We’ve not got an extreme asymmetry — the US arguing about what fiduciary duty even means, Europe getting on with implementation — and that’s what custodians, asset managers, and proxy infrastructure providers have got to plan around.”
US approach — gradual reform, market-driven answers
US proxy voting is in the midst of substantial reform, stemming from a 2025 court judgement rendering void strict SEC supervision of proxy advisors. A change toward ‘proxy voting choice’ is enabling asset managers to pass voting choices to investors. Reforms are seeking to diminish the sway of large firms including ISS and Glass Lewis, and to diminish ESG factors in ERISA plans, and decrease the expenses of fund voting.
In July 2025, a District of Columbia Circuit Court ruled that instruction from proxy advisory firms does not classify as a ‘solicitation’ under the Securities Exchange Act, undermining 2020 SEC rules that intended to increase oversight of these firms. However the White House is considering executive demands to limit advisor recommendations.
A December 2025, US administration executive order targeted the enhanced oversight of proxy advisors, in tandem with a SEC guidance instructs regulators to review all proxy voting rules to reconsider diversity, equity, and inclusion and ESG policies, and emphasise investor returns. The slew of executive orders passed in late 2025 and implemented through 2026 are aimed at curbing ESG factors in ERISA plan proxy voting, requesting fiduciaries to solely concentrate on financial, risk-adjusted value.
US proxy voting policy has moved towards diminishing the sway of shareholders and proxy advisors with social agendas, giving companies greater authority over their annual general meeting agendas.
ISS has now taken a case-by-case stance toward environmental and social proposals for 2026, compared to automatic backing. Large asset managers such as BlackRock have changed their stewardship policy terminology from ‘long-term shareholder value’ to ‘long-term financial value’ reflecting a shift in values from ESG to financial.
Regulatory pressure is rising to increase the minimum stock ownership needed for giving in proposals, which could restrict a path to the ballot. Universal proxy rules mandate that firms and dissidents name all nominees on their cards, generating a more impartial yet complex voting process.
Reali comments: “Current US regulatory developments are pushing proxy voting toward an increased focus on financial metrics, greater scrutiny, clearer process, and stronger accountability.
“In practice, that means firms are under more pressure to show how voting decisions are made, how engagement is governed, and how policies are applied consistently. The effect is not just procedural. It is changing how stewardship teams document decisions, oversee voting, and manage risk.”
An ICI spokesperson notes: “In the US, proxy reform is currently likely to focus on shareholder proposals, and potentially regulation of proxy advisors. Also, recent developments among public companies have focused on increasing investor participation through a retail shareholder voting programme for one large corporate issuer. For US funds as issuers, challenges have centered around reaching quorum, even for routine matters. ICI has recommended a more tailored quorum requirement in tandem with a higher approval threshold as one way to overcome this.
Wilson explains that US regulatory developments are currently the sole largest variable in global proxy practice, with almost none of that technical.
“The current administration’s posture, tighter constraints on proxy advisors, narrower 14a-8 admissibility, a pivot toward ‘pecuniary interest only’ framings of fiduciary duty, and active anti-ESG legislation at state level, is rewriting the substantive rulebook faster than infrastructure can adjust.
Much of the political debate on this area is formed on a misinterpretation of fiduciary duty and blatant misinformation in some places, she argues.
“Fiduciary duty is not a blank slate. It has decades of settled content under ERISA, Delaware corporate law, and state trust law, centered on duties of loyalty and care. None of that authority equates fiduciary duty with maximising short-term financial return, and none of it instructs trustees to ignore material risks.
“The pecuniary interest only framing now in vogue treats consideration of climate, supply-chain, regulatory, and human-capital risk as somehow a deviation from fiduciary duty, when on any serious reading, the deviation runs the other way: ignoring material risk is what the duty of care actually forbids.
“Compounding this, no-one invoking pecuniary has been willing to define it operationally. That ambiguity is itself the point, it gives fiduciaries a reason to be cautious, which suppresses voting activity without anyone having to legislate suppression.
“The result is real and unresolved tension on the ground: state pension trustees caught between political directives and their actual legal duties; plan sponsors second-guessing every governance vote; asset managers running parallel policies that some clients regard as legally required and others as legally suspect. The tension is unresolved precisely because it is built on a misunderstanding that no actor has the political incentive to clarify.”
Divergence over proxy voting reform
Contrasting attitudes to ESG issues, fiduciary duty, and the role of proxy advisors are broadening the transatlantic divide on proxy voting reform and policies. The recent departure from international uniform voting guidelines by large advisors highlights the investor concerns over the divergence.
Reali, describes the cross-jurisdictional proxy voting environment as shaped by structural divergence rather than gradual convergence. He explains that different regulatory, political, and market lenses, through which the US and Europe increasingly approach proxy voting reform, is creating greater complexity for global investors.
“The main drivers are differing priorities around transparency, accountability, governance, and the role of stewardship in the market. Rules and expectations are becoming more jurisdiction-specific, with firms needing to respond to local requirements while still maintaining a coherent global voting framework.
Reali predicts the divergence as likely to widen: “Regulatory focus is further developing market by market, and investors need to plan for a more fragmented environment and not assume harmonisation.”
An ICI spokesperson notes: “It’s difficult to draw direct comparisons between nascent developments in the United States and discussions underway in the European Union, as they address fundamentally different issues within very different regulatory and market structures.
“The EU and US proxy voting landscapes have long evolved within distinct legal and institutional ecosystems, and in the EU in particular, differences across Member State practices continue to shape how the framework operates in practice. These structural features make one?to?one comparisons challenging. Also, for funds, proxy reform can mean many things, and relate broadly to how funds vote proxies as investors or conduct their own proxy campaigns as issuers.
“In any jurisdiction, ICI believes that effective shareholder rights twinned with efficient processes for companies and funds are a cornerstone of well?functioning capital markets and sound corporate governance.”
Anti-ESG political pressure in the US
The December 2025 US executive order ‘Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors’, instructed the SEC and other bodies to review and potentially abolish regulation or guidance that encourage ESG, and Diversity, Equity, and Inclusion (DEI) policies, if policies do not align with prioritising pecuniary returns. The order required the Department of Labor to tighten fiduciary standards, to force ERISA plan managers to focus on financial returns over social policies. SEC was directed to carry out comprehensive evaluations of specific firms, including Institutional Shareholder Services (ISS) and Glass Lewis. Following this mandate, ISS and Glass Lewis amended their proxy voting practices to lessen their focus on wide ESG mandates instead shifting to a case-by-case approach for clients. Glass Lewis said in late 2025, it would discontinue uniform proxy voting recommendations for US and European clients, over differing investor priorities and stances on fiduciary duty.
Sandford Lewis, director and general counsel of Shareholder Rights Group, says sustainability and DEI policies is a clear area of difference between jurisdictions as there is a blatant effort from the US government to curtail the proxy advisors’ ability to back sustainability and DEI policies.
“In the US there is a concerted campaign, happening both at the federal level and at the state level, to constrain the ability of proxy advisors to support environmental and social shareholder proposals and to integrate ESG analysis to proxy voting and asset management. There is also significant pushback against this trend including a recent court case finding that restraints on proxy advisor abilities to support environmental and social proposals violates constitutional norms. However, the fight over these issues are likely to continue for the foreseeable future.
“In addition, the White House published an executive order on 11 December calling for regulators to adopt constraints on both proxy advisors and environmental and social shareholder proposals. Again, this contest is expected to play out over the next few years.”
“In addition to the efforts to constrain proxy advisors, US regulators are also making it more difficult for large asset managers to connect sustainability concerns with proxy voting on directors. In my opinion, the threatened imposition of complex and costly 13 D disclosure requirements for large asset managers has had the effect of silencing some asset managers from engaging on material issues. This threat also applies to European asset managers holding assets in US companies.”
The ESG split
The divergence in proxy voting practices between the US and EU contrary stewardship philosophies is most marked across ESG issues. While European firms have continued strong backing of ESG-linked proposals, only declining marginally to 91 per cent in these three years, US asset managers have noticeably diminished their support of ESG-linked proposals with a decrease to 31 per cent support in the last three proxy years, according to a Morningstar survey March, 2026.
Campaigns against ESG and DEI in the US were solidified by the December 2025 Executive Order, intending to diminish the impact of large proxy firms on DEI and ESG issues. Consequently, proxy voting in the US is progressively being marked by opposition to ESG. At US companies, shareholders have put forward approximately half as many proposals on environmental, social, and governance issues (184) in the 2026 proxy voting season, compared to last year. It comes as Republicans are putting pressure on moving corporate influence from investors to managers.
In Europe, numerous asset owners have ended US manager mandates due to voting misalignment, such as Dutch pension fund PME Pensioenfonds terminating its partnership with BlackRock for its equity portfolios after an ESG evaluation of its external asset manager. It followed another Dutch pension fund PFZW cutting back €14 billion from the companies in an effort to move to a more sustainability-focused investment approach.
Wilson explains that the clear, durable structural divergence across ESG for global investors, with differing rules, rules, rhetoric, and legal risks attached has resulted in there no longer being a single workstream.
“It is the place where the cultural gap and the misinformation gap between regimes are doing the most concrete work, concrete because it shows up in votes cast, engagements not undertaken, and disclosures not made.”
Europe is ramping up its ESG disclosures and due diligence requirements. Wilson explains that the continent has embedded sustainability into market infrastructure, with SFDR, CSRD, the Taxonomy, and the supervisory architecture viewed as a core component of capital markets, not an optional overlay.
She notes: “The premise, while contested in detail, but broadly accepted across the political spectrum, is that sustainability information is financially material and that markets price it better when it is disclosed consistently. That premise sits comfortably alongside the European stewardship tradition and is supported by decades of work in actuarial, prudential, and risk-management thinking.”
In stark contrast the US is moving the other direction, and on the foundation of contested and frequently misstated readings of fiduciary duty, Wilson remarks.
“The chilling effect is the most important phenomenon to understand here, because it operates well beyond the formal rules. Once a category of risk is politically coded as ESG, fiduciaries have a strong incentive to underweight it or to avoid engaging with it altogether, even where ignoring it would itself be a fiduciary failure under any settled understanding of the duty of care. Climate transition, regulatory exposure, supply-chain dependency, and human-capital risk are financially material on any serious analysis.
“Yet plan sponsors, state pension trustees, and asset managers increasingly behave as if active engagement on those topics carries more legal risk than passive disregard. That is exactly backwards as a matter of fiduciary law, but it is a rational response to political and reputational pressure in the absence of any actor willing to clarify what the duty actually requires.
“Interestingly, Asia sits in a different place again; pragmatic, issuer-led, often state-influenced, and generally more comfortable with stewardship as a directed activity than either Europe or the US.”
Overall the market is seeing a split with diverging standards across the regions where Europe is increasingly ESG-focused, while the US is moving in a profit-first, anti-DEI direction.
Sway of proxy advisors
Proxy advisors have stronger influence in the United States, compared to Europe, due to more diluted, collective action rights of US shareholders.
The US regulatory environment has traditionally created the conditions that have made it more difficult for institutional investors to function collectively.
This has resulted in them employing third-party advisors for cover against potential political or regulatory hitback when voting on contentious issues, while European investors have engaged with companies straight up. Despite the variation between jurisdictions, proxy advisors command a global influence with companies such as ISS and Glass Lewis having a major share of the advisor market across both areas.
Shareholder rights
Under UK law, shareholders can file proposals if they possess five percent or more of the voting rights, or if 100 shareholders possess an average of £100 each, in an effort to encourage shareholder engagement.
Meanwhile, the US requires a length of ownership, and minimum monetary amount (for example US$2,000 held for three years or US$25,000 for one year). Traditionally, the UK has supported institutional investors to sway managers, while the US has been more critical of such action, with different avenues for impact.
Fragmentation risk for investors
As proxy voting reform is progressively fragmented with the US and Europe diverging on their approaches towards core issues, asset managers must navigate operational burden. This involves handling dual systems, different deadlines, formats, and voting platforms, and additionally leads to greater costs, and risk of miscounted votes. Strategically it creates difficulty in enforcing consistent stewardship policies internationally and it can cause governance arbitrage across jurisdictions.
Lewis notes that: “Global asset managers are establishing differential policies and services for US and European asset owner clients, reflecting the greater demand for ESG stewardship in Europe. There are also US asset owners, particularly public pension funds in states that take a proactive posture on systemic risks like climate change, that are demanding the same types of services, but the large US asset managers are also under fire from Republican state attorney generals and certain congressional leaders that are targeting unprecedented investigations and novel anti-competition law theories leveled against proactive managers of global risks like climate change. This is having a chilling effect in the US.”
Challenges of fragmentation can include scaling operations, managing contrasting ESG regulations, handling high liquidity risk, and different laws on technology while pursuing growth in the private market. Asset managers must balance centralised control with local market adaptation and function within a volatile environment characterised by complex foreign exchange markets, changing interest rates, and geopolitical stakes.
Reali explains: “Fragmentation risk remains significant and is growing. Global investors are dealing with different regulatory expectations, market practices, reporting requirements, and stewardship standards across jurisdictions, which increases operational complexity, cost, and the risk of inconsistency. It also makes it harder to maintain a coherent global voting approach while still responding properly to local rules.
“In many cases, current market infrastructure is still not well suited to that reality. Legacy processes, fragmented data flows, manual touchpoints, and differing market standards can all make cross-border voting less efficient and less scalable. For global investors, the need is increasingly for infrastructure that supports consistency at a global level but can still adapt to local requirements.”
Wilson describes fragmentations as having “graduated from a back-office nuisance to a material operational and reputational risk.
“A global manager today runs parallel stewardship policies, parallel public disclosures (CSRD-aligned for Europe, increasingly cautious or anti-ESG-aware in the US), parallel proxy voting workflows, and parallel internal narratives.
That sometimes means having to say meaningfully different things to different audiences about the same vote on the same security.
“That is not a sustainable equilibrium without clear guardrails. It creates legal risk in both directions: anti-ESG litigation and state-contract exclusion in parts of the US, and inadequate stewardship challenges in Europe. That creates client communication risk, because asset owners increasingly notice the inconsistency. And it creates operational risk, because the underlying infrastructure was built for domestic intermediation, not for global stewardship at scale.”
Wilson says market infrastructure is the more painless part to deal with, with ISO 20022-aligned messaging, golden-source shareholder identification, standardised vote confirmations, and shared reference data all amenable.
She comments that the industry has lacked commercial pressure or incentive to deploy the technology harmoniously, despite having it for decades.
The conceptual difference between the underlying regimes — not only the operational difference — is the more challenging issue according to Wilson. She says this gap cannot be engineered away:
“Investors need to translate, not merely comply. Global managers will increasingly need teams that genuinely understand both the European stewardship tradition and the American shareholder-primacy tradition as living frameworks, not just as sets of rules to be checked off. I do think that the infrastructure questions are solvable, but the cultural-fluency question is the one most firms are underinvesting in.”
Asset servicers navigating the divide
Reali explains that: “Divergence raises the bar significantly. Service providers are under pressure to offer more flexible, integrated, and transparent solutions.
“The value proposition is shifting toward helping clients manage fragmentation without creating more of it internally. Providers that can combine strong local market coverage with better workflow integration, data visibility, and exception management are likely to be at an advantage.
Wilson remarks: “Fundamentally it means having to acknowledge that stewardship is not really “just plumbing”. Custodians and asset servicers are exceptional at what they were built to do: securities settlement, asset safekeeping, transaction infrastructure, the regulated plumbing on which global investing depends. Stewardship is a different discipline. It is interpretation, translation, and advisory judgement across regimes that no longer share assumptions, and it does not fit naturally into a custodial operating model.
“The cost of trying to make it fit is real. Maintaining divergent operating models, jurisdiction-specific compliance, parallel reporting frameworks, and reconciliation across mismatched record dates and confirmation standards is expensive, and the trajectory is for that cost to grow rather than shrink. Anti-ESG state contracting in the US, CSRD and SRD II reporting in Europe, and a continuing flow of national-level rules in both directions all land on operational teams that were not designed to make stewardship judgements.
“There is also a defensive imperative. As substantive rules diverge, the operational risk of getting it wrong grows. A missed vote, a misclassified ESG-related proposal, an inconsistent disclosure, any of these can become a public-affairs problem in ways they wouldn’t have five years ago. The cleanest way to manage that risk is to put it in the hands of specialists whose entire business is owning this complexity end-to-end.
“The providers who define the next decade are the specialist proxy voting solutions that partner with custodians, take the regulatory and cultural complexity off their plates, and let each part of the chain do what it does best.
“Stewardship is not plumbing, and pretending otherwise is the most expensive mistake an asset servicing model can make.”
Market infrastructure gaps
Reali explains: “The biggest differences tend to lie in how voting rights, market deadlines, shareholding structures, and intermediary chains are organised across jurisdictions.
“A key distinction is that the US is a record date market, whereas non-US markets are much more of a mixed bag. US proxy voting is highly efficient, with a vote acceptance rate of over 99.99 per cent, which reinforces the point that the US market infrastructure is generally not seen as needing fundamental repair in the same way that cross-border or more fragmented non-US processes often do.
“The fragmentation issue is much more a non-US market challenge; in the US, many of these operational frictions do not arise in the same way.
“For investors voting across borders, those differences can make the process more operationally complex, less transparent, and harder to standardise.
“The result is often more manual intervention, greater reconciliation challenges, and less certainty that voting instructions are processed and confirmed consistently from end to end.
“From a transparency and efficiency perspective, fragmented infrastructure can slow decision-making, increase operational risk, and make it harder for global investors to maintain a single, consistent voting framework across markets.”
There are distinct differences between the two blocs, Wilson remarks with US proxy infrastructure established on a deploy intermediated role: “Securities held in street name through Cede & Co. at DTC, retail proxy distribution dominated by a single processor in Broadridge, and a long-standing reluctance to have issuers know who their beneficial owners actually are.”
“That architecture reflects a Wall Street assumption that the relationship between issuer and shareholder is transactional, occasionally adversarial, and best mediated by a whole range of market actors.”
Europe’s infrastructure is more fragmented, Wilson states.
“SRD II’s shareholder identification regime, vote confirmation requirements, and engagement disclosure obligations reflect a different cultural premise which is that the issuer should know its shareholders, that voting is an act of active ownership — stewardship rather than a market transaction, and that the chain between beneficial owner and ballot should be auditable end-to-end.
“The practical consequence is an asymmetry: European investors increasingly get vote-chain visibility into European issuers that US investors still do not get domestically. Cross-border, both sides still wrestle with deadline mismatches, record-date variation, language and translation friction, and inconsistent confirmation.
“But the trajectory diverges. Europe is closing operational gaps in a direction the culture supports. The US is reopening conceptual ones.
“For cross-border voting specifically, this means the friction is no longer evenly distributed. Voting a European portfolio from the US is becoming materially easier than voting a US portfolio from Europe, not because of bad infrastructure on either side, but because the two systems are optimising for different things.
Custodians sit in the middle of that asymmetry.”
System under pressure
As proxy voting reform faces a marked transatlantic divide, ESG is the most clear-cut area of difference.
Divergence has the potential to diminish investor confidence and voting integrity in international markets and requires proper coordination.
With EU reforms largely focused on sustainability and stewardship, the US on management alignment, asset servicers are being pushed to enhance transparency and generate split-system voting platforms to navigate this broadening, high-stakes divergence.
Widening and stark divergence between Europe and the United States on proxy voting reform is being pushed by conflicting approaches to sustainability, fiduciary duty, shareholder proposals, and the function of proxy advisors.
The US is facing substantially stricter oversight, on one hand, increasingly moving to curb environmental and social proposals and suppressing the authority of proxy advisors. Conversely, European regulators are shifting to modernise shareholder rights, extend political participation, and potentially standardise rigid stewardship rules.
The US Securities Exchange Commission (SEC) has retreated on mediating in no-action requests, enabling companies greater freedom to omit proposals, resulting in a decrease in the quantity of ESG proposals. Conversely in Europe, proposals are legally binding across many administrations and supervisory bodies are evaluating the Shareholder Rights Directive (SRD II) with the view to bolster as opposed to diminishing shareholder rights and engagement, with a SRD III expected to be put forward by late 2026.
ISS, a larger advisor in the US, has said it will cease suggesting voting for environmental and social (E&S) proposals, changing to a case-by-case review this year. European managers are prioritising systemic stewardship and demonstrating greater support for E&S proposals in contrast to their US equivalents. Europe is seeking increased integration of capital markets, enhanced transparency, with consultations to rectify SRFII to better the identification of shareholders.
Proxy voting reform today
Proxy voting has shifted to become a strategic pillar of corporate governance functioning as a core mechanism for shareholders to impact company decision-making, ensure director accountability, and preserve long-term investments.
Today, global asset managers operating US-Europe cross-border portfolios are facing high-risk, as they manage complex regulatory fragmentation including EU’s Undertakings for Collective Investment in Transferable Securities, Alternative Investment Fund Managers Directive, and US’s SEC rules. Proxy advisors are seeking to address this split through abolishing universal recommendations and opting for personalised, region-specific voting, set to become guidelines by 2027.
Global asset managers are experiencing high stakes, such as potential mandates, terminations, and reputational risk as a result of these cross-jurisdictional divides, with European asset managers having ended mandates of US asset managers who fail to comply with rigorous European ESG stewardship standards.
Europe — harmonisation and intricacy
Proxy voting reform in Europe is prioritising enhancing transparency, digital efficiency, and client guided pass-through voting to attain improved stewardship standards.
Key reforms are set on curbing fragmentation across member states, ramping up scrutiny of proxy advisors, and allowing asset owners to have authority voting on ESG concerns.
Large European asset managers such as DWS and Legal & General are progressively permitting clients in pooled funds to direct votes using tools they have introduced. Pass-though voting adoption, enables investors to choose customised voting policies compared to depending on a single, standardised method.
Continuing reviews of the EU’s Shareholder Rights Directive II (SRD II) seek to address national fragmentation in proxy channels. The latest consultation on the SRD II framework is concentrating on refining regulations on vote transparency, shareholder identification, and the likely requirement to fix the five per cent threshold for lodging proposals.
Peter Reali, senior vice-president and general manager, Institutional Governance, Broadridge, remarks: “There is renewed momentum behind harmonisation in Europe at the policy level, but the picture on the ground remains mixed.
“Good examples are the Capital Markets Union and the European Commission’s latest call for evidence on the evaluation and review of the SRD II, which signals that shareholder rights, transparency in the intermediary chain, and the functioning of cross-border voting remain active policy priorities at EU level.
Simultaneously, implementation has been inconsistent, and the market continues to face meaningful national variation according to Reali.
“So the answer is really that both dynamics are happening at once: the EU continues to push toward greater harmonisation, but operationally there is still fragmentation because member states have applied the framework differently and market practices continue to vary across jurisdictions.”
An Investment Company Institute (ICI) spokesperson says the European Commission’s review of the SRD is the focus point of EU discussion around reform. “That framework governs the exercise of shareholder rights in listed companies and is primarily aimed at improving shareholder identification, communication, and participation across borders within the EU.
In ICI’s view, the SRD framework is functioning well and has delivered meaningful improvements in these areas. If the Commission were to consider adjustments, they should be narrow, evidence?based, and carefully targeted to focus on reducing remaining inefficiencies and preserving effective information flows and cross?border voting, rather than reopening the framework more broadly.”
SRD II created a clear directional consensus, according to Sarah Wilson, Minerva Analytics CEO, which includes: shareholder identification, vote confirmation, engagement transparency, intermediary obligations to facilitate ownership, not just exchange.
“The Listing Act, ESMA’s reviews, and the broader Capital Markets Union agenda continue in the same direction. There is genuine appetite for further convergence at the messaging, disclosure, and post-trade layer.
“But. There is a real lack of joining up across a whole raft of regulations. Plus, the European Union is not going to produce a uniform companies act any time soon. The treaties preserve member-state competence over company law and the political appetite for ceding that competence has never really existed. The cultural diversity it reflects is itself part of the European settlement itself, whether that’s Germany’s two-tier board, France’s loi PACTE, the Netherlands’ stakeholder jurisprudence, the Nordics’ nomination-committee tradition, and the UK’s now-distinct stewardship code are different models, each sitting in different bodies of national law that govern the actual mechanics of voting.”
Wilson explains that this condition is not unique to Europe: “The US is structurally similar: 50 state corporate-law regimes, with Delaware’s long dominance now under active competitive pressure from Texas, including a new Business Court, high-profile reincorporations, and a state-backed exchange.
“So, the right framing is pluralistic harmonisation: a shared direction of travel at the operational and disclosure layer, layered over genuinely different national legal and cultural conceptions of what a shareholder is for. For global investors, “harmonisation in Europe” should not be read as “one European regime emerging.” It is many regimes becoming more interoperable while staying substantively distinct.
Heightened scrutiny of proxy advisors including Glass Lewis and ISS is resulting in amendments to how voting recommendations are created, particularly regarding separating services, and targeting possible conflicts of interest.
The majority of European asset managers (80 per cent) continue to vote in support of environmental and social proposals. Glass Lewis is moving toward custom voting systems with plans to stop providing general benchmark rules by 2027, as it accounts for diverging cross-jurisdiction ESG approaches. Greater investor engagement has resulted in increased turnout at annual general meetings and there has been a take up of more automated voting systems to oversee the larger volume.
Wilson says Europe is not religating its first principles,
“Cross-party support for stewardship and disclosure has held up through multiple election cycles. Reforms are incremental and closely debated by market participants. We’ve not got an extreme asymmetry — the US arguing about what fiduciary duty even means, Europe getting on with implementation — and that’s what custodians, asset managers, and proxy infrastructure providers have got to plan around.”
US approach — gradual reform, market-driven answers
US proxy voting is in the midst of substantial reform, stemming from a 2025 court judgement rendering void strict SEC supervision of proxy advisors. A change toward ‘proxy voting choice’ is enabling asset managers to pass voting choices to investors. Reforms are seeking to diminish the sway of large firms including ISS and Glass Lewis, and to diminish ESG factors in ERISA plans, and decrease the expenses of fund voting.
In July 2025, a District of Columbia Circuit Court ruled that instruction from proxy advisory firms does not classify as a ‘solicitation’ under the Securities Exchange Act, undermining 2020 SEC rules that intended to increase oversight of these firms. However the White House is considering executive demands to limit advisor recommendations.
A December 2025, US administration executive order targeted the enhanced oversight of proxy advisors, in tandem with a SEC guidance instructs regulators to review all proxy voting rules to reconsider diversity, equity, and inclusion and ESG policies, and emphasise investor returns. The slew of executive orders passed in late 2025 and implemented through 2026 are aimed at curbing ESG factors in ERISA plan proxy voting, requesting fiduciaries to solely concentrate on financial, risk-adjusted value.
US proxy voting policy has moved towards diminishing the sway of shareholders and proxy advisors with social agendas, giving companies greater authority over their annual general meeting agendas.
ISS has now taken a case-by-case stance toward environmental and social proposals for 2026, compared to automatic backing. Large asset managers such as BlackRock have changed their stewardship policy terminology from ‘long-term shareholder value’ to ‘long-term financial value’ reflecting a shift in values from ESG to financial.
Regulatory pressure is rising to increase the minimum stock ownership needed for giving in proposals, which could restrict a path to the ballot. Universal proxy rules mandate that firms and dissidents name all nominees on their cards, generating a more impartial yet complex voting process.
Reali comments: “Current US regulatory developments are pushing proxy voting toward an increased focus on financial metrics, greater scrutiny, clearer process, and stronger accountability.
“In practice, that means firms are under more pressure to show how voting decisions are made, how engagement is governed, and how policies are applied consistently. The effect is not just procedural. It is changing how stewardship teams document decisions, oversee voting, and manage risk.”
An ICI spokesperson notes: “In the US, proxy reform is currently likely to focus on shareholder proposals, and potentially regulation of proxy advisors. Also, recent developments among public companies have focused on increasing investor participation through a retail shareholder voting programme for one large corporate issuer. For US funds as issuers, challenges have centered around reaching quorum, even for routine matters. ICI has recommended a more tailored quorum requirement in tandem with a higher approval threshold as one way to overcome this.
Wilson explains that US regulatory developments are currently the sole largest variable in global proxy practice, with almost none of that technical.
“The current administration’s posture, tighter constraints on proxy advisors, narrower 14a-8 admissibility, a pivot toward ‘pecuniary interest only’ framings of fiduciary duty, and active anti-ESG legislation at state level, is rewriting the substantive rulebook faster than infrastructure can adjust.
Much of the political debate on this area is formed on a misinterpretation of fiduciary duty and blatant misinformation in some places, she argues.
“Fiduciary duty is not a blank slate. It has decades of settled content under ERISA, Delaware corporate law, and state trust law, centered on duties of loyalty and care. None of that authority equates fiduciary duty with maximising short-term financial return, and none of it instructs trustees to ignore material risks.
“The pecuniary interest only framing now in vogue treats consideration of climate, supply-chain, regulatory, and human-capital risk as somehow a deviation from fiduciary duty, when on any serious reading, the deviation runs the other way: ignoring material risk is what the duty of care actually forbids.
“Compounding this, no-one invoking pecuniary has been willing to define it operationally. That ambiguity is itself the point, it gives fiduciaries a reason to be cautious, which suppresses voting activity without anyone having to legislate suppression.
“The result is real and unresolved tension on the ground: state pension trustees caught between political directives and their actual legal duties; plan sponsors second-guessing every governance vote; asset managers running parallel policies that some clients regard as legally required and others as legally suspect. The tension is unresolved precisely because it is built on a misunderstanding that no actor has the political incentive to clarify.”
Divergence over proxy voting reform
Contrasting attitudes to ESG issues, fiduciary duty, and the role of proxy advisors are broadening the transatlantic divide on proxy voting reform and policies. The recent departure from international uniform voting guidelines by large advisors highlights the investor concerns over the divergence.
Reali, describes the cross-jurisdictional proxy voting environment as shaped by structural divergence rather than gradual convergence. He explains that different regulatory, political, and market lenses, through which the US and Europe increasingly approach proxy voting reform, is creating greater complexity for global investors.
“The main drivers are differing priorities around transparency, accountability, governance, and the role of stewardship in the market. Rules and expectations are becoming more jurisdiction-specific, with firms needing to respond to local requirements while still maintaining a coherent global voting framework.
Reali predicts the divergence as likely to widen: “Regulatory focus is further developing market by market, and investors need to plan for a more fragmented environment and not assume harmonisation.”
An ICI spokesperson notes: “It’s difficult to draw direct comparisons between nascent developments in the United States and discussions underway in the European Union, as they address fundamentally different issues within very different regulatory and market structures.
“The EU and US proxy voting landscapes have long evolved within distinct legal and institutional ecosystems, and in the EU in particular, differences across Member State practices continue to shape how the framework operates in practice. These structural features make one?to?one comparisons challenging. Also, for funds, proxy reform can mean many things, and relate broadly to how funds vote proxies as investors or conduct their own proxy campaigns as issuers.
“In any jurisdiction, ICI believes that effective shareholder rights twinned with efficient processes for companies and funds are a cornerstone of well?functioning capital markets and sound corporate governance.”
Anti-ESG political pressure in the US
The December 2025 US executive order ‘Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors’, instructed the SEC and other bodies to review and potentially abolish regulation or guidance that encourage ESG, and Diversity, Equity, and Inclusion (DEI) policies, if policies do not align with prioritising pecuniary returns. The order required the Department of Labor to tighten fiduciary standards, to force ERISA plan managers to focus on financial returns over social policies. SEC was directed to carry out comprehensive evaluations of specific firms, including Institutional Shareholder Services (ISS) and Glass Lewis. Following this mandate, ISS and Glass Lewis amended their proxy voting practices to lessen their focus on wide ESG mandates instead shifting to a case-by-case approach for clients. Glass Lewis said in late 2025, it would discontinue uniform proxy voting recommendations for US and European clients, over differing investor priorities and stances on fiduciary duty.
Sandford Lewis, director and general counsel of Shareholder Rights Group, says sustainability and DEI policies is a clear area of difference between jurisdictions as there is a blatant effort from the US government to curtail the proxy advisors’ ability to back sustainability and DEI policies.
“In the US there is a concerted campaign, happening both at the federal level and at the state level, to constrain the ability of proxy advisors to support environmental and social shareholder proposals and to integrate ESG analysis to proxy voting and asset management. There is also significant pushback against this trend including a recent court case finding that restraints on proxy advisor abilities to support environmental and social proposals violates constitutional norms. However, the fight over these issues are likely to continue for the foreseeable future.
“In addition, the White House published an executive order on 11 December calling for regulators to adopt constraints on both proxy advisors and environmental and social shareholder proposals. Again, this contest is expected to play out over the next few years.”
“In addition to the efforts to constrain proxy advisors, US regulators are also making it more difficult for large asset managers to connect sustainability concerns with proxy voting on directors. In my opinion, the threatened imposition of complex and costly 13 D disclosure requirements for large asset managers has had the effect of silencing some asset managers from engaging on material issues. This threat also applies to European asset managers holding assets in US companies.”
The ESG split
The divergence in proxy voting practices between the US and EU contrary stewardship philosophies is most marked across ESG issues. While European firms have continued strong backing of ESG-linked proposals, only declining marginally to 91 per cent in these three years, US asset managers have noticeably diminished their support of ESG-linked proposals with a decrease to 31 per cent support in the last three proxy years, according to a Morningstar survey March, 2026.
Campaigns against ESG and DEI in the US were solidified by the December 2025 Executive Order, intending to diminish the impact of large proxy firms on DEI and ESG issues. Consequently, proxy voting in the US is progressively being marked by opposition to ESG. At US companies, shareholders have put forward approximately half as many proposals on environmental, social, and governance issues (184) in the 2026 proxy voting season, compared to last year. It comes as Republicans are putting pressure on moving corporate influence from investors to managers.
In Europe, numerous asset owners have ended US manager mandates due to voting misalignment, such as Dutch pension fund PME Pensioenfonds terminating its partnership with BlackRock for its equity portfolios after an ESG evaluation of its external asset manager. It followed another Dutch pension fund PFZW cutting back €14 billion from the companies in an effort to move to a more sustainability-focused investment approach.
Wilson explains that the clear, durable structural divergence across ESG for global investors, with differing rules, rules, rhetoric, and legal risks attached has resulted in there no longer being a single workstream.
“It is the place where the cultural gap and the misinformation gap between regimes are doing the most concrete work, concrete because it shows up in votes cast, engagements not undertaken, and disclosures not made.”
Europe is ramping up its ESG disclosures and due diligence requirements. Wilson explains that the continent has embedded sustainability into market infrastructure, with SFDR, CSRD, the Taxonomy, and the supervisory architecture viewed as a core component of capital markets, not an optional overlay.
She notes: “The premise, while contested in detail, but broadly accepted across the political spectrum, is that sustainability information is financially material and that markets price it better when it is disclosed consistently. That premise sits comfortably alongside the European stewardship tradition and is supported by decades of work in actuarial, prudential, and risk-management thinking.”
In stark contrast the US is moving the other direction, and on the foundation of contested and frequently misstated readings of fiduciary duty, Wilson remarks.
“The chilling effect is the most important phenomenon to understand here, because it operates well beyond the formal rules. Once a category of risk is politically coded as ESG, fiduciaries have a strong incentive to underweight it or to avoid engaging with it altogether, even where ignoring it would itself be a fiduciary failure under any settled understanding of the duty of care. Climate transition, regulatory exposure, supply-chain dependency, and human-capital risk are financially material on any serious analysis.
“Yet plan sponsors, state pension trustees, and asset managers increasingly behave as if active engagement on those topics carries more legal risk than passive disregard. That is exactly backwards as a matter of fiduciary law, but it is a rational response to political and reputational pressure in the absence of any actor willing to clarify what the duty actually requires.
“Interestingly, Asia sits in a different place again; pragmatic, issuer-led, often state-influenced, and generally more comfortable with stewardship as a directed activity than either Europe or the US.”
Overall the market is seeing a split with diverging standards across the regions where Europe is increasingly ESG-focused, while the US is moving in a profit-first, anti-DEI direction.
Sway of proxy advisors
Proxy advisors have stronger influence in the United States, compared to Europe, due to more diluted, collective action rights of US shareholders.
The US regulatory environment has traditionally created the conditions that have made it more difficult for institutional investors to function collectively.
This has resulted in them employing third-party advisors for cover against potential political or regulatory hitback when voting on contentious issues, while European investors have engaged with companies straight up. Despite the variation between jurisdictions, proxy advisors command a global influence with companies such as ISS and Glass Lewis having a major share of the advisor market across both areas.
Shareholder rights
Under UK law, shareholders can file proposals if they possess five percent or more of the voting rights, or if 100 shareholders possess an average of £100 each, in an effort to encourage shareholder engagement.
Meanwhile, the US requires a length of ownership, and minimum monetary amount (for example US$2,000 held for three years or US$25,000 for one year). Traditionally, the UK has supported institutional investors to sway managers, while the US has been more critical of such action, with different avenues for impact.
Fragmentation risk for investors
As proxy voting reform is progressively fragmented with the US and Europe diverging on their approaches towards core issues, asset managers must navigate operational burden. This involves handling dual systems, different deadlines, formats, and voting platforms, and additionally leads to greater costs, and risk of miscounted votes. Strategically it creates difficulty in enforcing consistent stewardship policies internationally and it can cause governance arbitrage across jurisdictions.
Lewis notes that: “Global asset managers are establishing differential policies and services for US and European asset owner clients, reflecting the greater demand for ESG stewardship in Europe. There are also US asset owners, particularly public pension funds in states that take a proactive posture on systemic risks like climate change, that are demanding the same types of services, but the large US asset managers are also under fire from Republican state attorney generals and certain congressional leaders that are targeting unprecedented investigations and novel anti-competition law theories leveled against proactive managers of global risks like climate change. This is having a chilling effect in the US.”
Challenges of fragmentation can include scaling operations, managing contrasting ESG regulations, handling high liquidity risk, and different laws on technology while pursuing growth in the private market. Asset managers must balance centralised control with local market adaptation and function within a volatile environment characterised by complex foreign exchange markets, changing interest rates, and geopolitical stakes.
Reali explains: “Fragmentation risk remains significant and is growing. Global investors are dealing with different regulatory expectations, market practices, reporting requirements, and stewardship standards across jurisdictions, which increases operational complexity, cost, and the risk of inconsistency. It also makes it harder to maintain a coherent global voting approach while still responding properly to local rules.
“In many cases, current market infrastructure is still not well suited to that reality. Legacy processes, fragmented data flows, manual touchpoints, and differing market standards can all make cross-border voting less efficient and less scalable. For global investors, the need is increasingly for infrastructure that supports consistency at a global level but can still adapt to local requirements.”
Wilson describes fragmentations as having “graduated from a back-office nuisance to a material operational and reputational risk.
“A global manager today runs parallel stewardship policies, parallel public disclosures (CSRD-aligned for Europe, increasingly cautious or anti-ESG-aware in the US), parallel proxy voting workflows, and parallel internal narratives.
That sometimes means having to say meaningfully different things to different audiences about the same vote on the same security.
“That is not a sustainable equilibrium without clear guardrails. It creates legal risk in both directions: anti-ESG litigation and state-contract exclusion in parts of the US, and inadequate stewardship challenges in Europe. That creates client communication risk, because asset owners increasingly notice the inconsistency. And it creates operational risk, because the underlying infrastructure was built for domestic intermediation, not for global stewardship at scale.”
Wilson says market infrastructure is the more painless part to deal with, with ISO 20022-aligned messaging, golden-source shareholder identification, standardised vote confirmations, and shared reference data all amenable.
She comments that the industry has lacked commercial pressure or incentive to deploy the technology harmoniously, despite having it for decades.
The conceptual difference between the underlying regimes — not only the operational difference — is the more challenging issue according to Wilson. She says this gap cannot be engineered away:
“Investors need to translate, not merely comply. Global managers will increasingly need teams that genuinely understand both the European stewardship tradition and the American shareholder-primacy tradition as living frameworks, not just as sets of rules to be checked off. I do think that the infrastructure questions are solvable, but the cultural-fluency question is the one most firms are underinvesting in.”
Asset servicers navigating the divide
Reali explains that: “Divergence raises the bar significantly. Service providers are under pressure to offer more flexible, integrated, and transparent solutions.
“The value proposition is shifting toward helping clients manage fragmentation without creating more of it internally. Providers that can combine strong local market coverage with better workflow integration, data visibility, and exception management are likely to be at an advantage.
Wilson remarks: “Fundamentally it means having to acknowledge that stewardship is not really “just plumbing”. Custodians and asset servicers are exceptional at what they were built to do: securities settlement, asset safekeeping, transaction infrastructure, the regulated plumbing on which global investing depends. Stewardship is a different discipline. It is interpretation, translation, and advisory judgement across regimes that no longer share assumptions, and it does not fit naturally into a custodial operating model.
“The cost of trying to make it fit is real. Maintaining divergent operating models, jurisdiction-specific compliance, parallel reporting frameworks, and reconciliation across mismatched record dates and confirmation standards is expensive, and the trajectory is for that cost to grow rather than shrink. Anti-ESG state contracting in the US, CSRD and SRD II reporting in Europe, and a continuing flow of national-level rules in both directions all land on operational teams that were not designed to make stewardship judgements.
“There is also a defensive imperative. As substantive rules diverge, the operational risk of getting it wrong grows. A missed vote, a misclassified ESG-related proposal, an inconsistent disclosure, any of these can become a public-affairs problem in ways they wouldn’t have five years ago. The cleanest way to manage that risk is to put it in the hands of specialists whose entire business is owning this complexity end-to-end.
“The providers who define the next decade are the specialist proxy voting solutions that partner with custodians, take the regulatory and cultural complexity off their plates, and let each part of the chain do what it does best.
“Stewardship is not plumbing, and pretending otherwise is the most expensive mistake an asset servicing model can make.”
Market infrastructure gaps
Reali explains: “The biggest differences tend to lie in how voting rights, market deadlines, shareholding structures, and intermediary chains are organised across jurisdictions.
“A key distinction is that the US is a record date market, whereas non-US markets are much more of a mixed bag. US proxy voting is highly efficient, with a vote acceptance rate of over 99.99 per cent, which reinforces the point that the US market infrastructure is generally not seen as needing fundamental repair in the same way that cross-border or more fragmented non-US processes often do.
“The fragmentation issue is much more a non-US market challenge; in the US, many of these operational frictions do not arise in the same way.
“For investors voting across borders, those differences can make the process more operationally complex, less transparent, and harder to standardise.
“The result is often more manual intervention, greater reconciliation challenges, and less certainty that voting instructions are processed and confirmed consistently from end to end.
“From a transparency and efficiency perspective, fragmented infrastructure can slow decision-making, increase operational risk, and make it harder for global investors to maintain a single, consistent voting framework across markets.”
There are distinct differences between the two blocs, Wilson remarks with US proxy infrastructure established on a deploy intermediated role: “Securities held in street name through Cede & Co. at DTC, retail proxy distribution dominated by a single processor in Broadridge, and a long-standing reluctance to have issuers know who their beneficial owners actually are.”
“That architecture reflects a Wall Street assumption that the relationship between issuer and shareholder is transactional, occasionally adversarial, and best mediated by a whole range of market actors.”
Europe’s infrastructure is more fragmented, Wilson states.
“SRD II’s shareholder identification regime, vote confirmation requirements, and engagement disclosure obligations reflect a different cultural premise which is that the issuer should know its shareholders, that voting is an act of active ownership — stewardship rather than a market transaction, and that the chain between beneficial owner and ballot should be auditable end-to-end.
“The practical consequence is an asymmetry: European investors increasingly get vote-chain visibility into European issuers that US investors still do not get domestically. Cross-border, both sides still wrestle with deadline mismatches, record-date variation, language and translation friction, and inconsistent confirmation.
“But the trajectory diverges. Europe is closing operational gaps in a direction the culture supports. The US is reopening conceptual ones.
“For cross-border voting specifically, this means the friction is no longer evenly distributed. Voting a European portfolio from the US is becoming materially easier than voting a US portfolio from Europe, not because of bad infrastructure on either side, but because the two systems are optimising for different things.
Custodians sit in the middle of that asymmetry.”
System under pressure
As proxy voting reform faces a marked transatlantic divide, ESG is the most clear-cut area of difference.
Divergence has the potential to diminish investor confidence and voting integrity in international markets and requires proper coordination.
With EU reforms largely focused on sustainability and stewardship, the US on management alignment, asset servicers are being pushed to enhance transparency and generate split-system voting platforms to navigate this broadening, high-stakes divergence.
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