The 2026 proxy season continued to highlight evolving shareholder sentiment and regulatory considerations surrounding executive compensation. This review delves into key trends observed in the first half of 2026, focusing on "Say on Pay" results, the influential role of Institutional Shareholder Services (ISS) in compensation evaluations, specific applications of pay-for-performance policies, proposed changes to executive compensation disclosure requirements by the Securities and Exchange Commission (SEC), and the voting outcomes for equity compensation plans. The data presented reflects a dynamic landscape where shareholder engagement, proxy advisor methodologies, and regulatory adjustments are shaping executive remuneration practices.
Key Trends in Executive Compensation for the 2026 Proxy Season
The first half of 2026 saw a continuation of robust shareholder support for executive compensation plans, though with nuanced shifts in voting patterns and increased scrutiny from proxy advisors. A significant development was the SEC’s proposal to streamline disclosure requirements, potentially impacting a vast majority of public companies.
A. Sustained Strong Say on Pay Results Amidst Shifting Dynamics
Shareholder approval of "Say on Pay" proposals remained remarkably high through the first half of 2026, underscoring a general alignment between companies and their investors on executive remuneration. The number of failed Say on Pay votes, where a proposal fails to achieve majority support, remained historically low. For companies within the S&P 500 index, the failure rate saw a marginal decrease, with only four companies experiencing failed votes in H1 2026, down from five in the same period of 2025. Similarly, the broader Russell 3000 index saw a reduction in failed votes, with 21 companies failing to secure majority support, a notable decline from 27 in H1 2025. This trend suggests a maturing dialogue between companies and shareholders on compensation matters, leading to more predictable outcomes.
Across both indices, an overwhelming 99% of Say on Pay proposals secured majority shareholder approval in H1 2026, a figure consistent with the previous year’s outcomes. Average shareholder support also saw a slight uptick. The S&P 500 reported an average support of 91%, an increase from 90% in H1 2025. The Russell 3000 mirrored this trend, with average support rising to 92% from 91% in the prior year.
Examining industry-specific data within the S&P 500, the communication services sector reported the lowest average support at approximately 74%. Conversely, the energy and materials sectors demonstrated the highest average support, reaching approximately 95%. Sectors experiencing failed Say on Pay votes in H1 2026 included healthcare, technology, communication services, and real estate. This contrasts with H1 2025, where healthcare, technology, industrial, and real estate sectors were represented among those with failed votes.
A more detailed analysis of failed votes revealed a significant trend: a decline in the year-over-year turnover of companies experiencing failed votes. This suggests that negative votes are becoming more "sticky," meaning that companies that failed to gain majority support in one year are finding it more challenging to fully recover shareholder confidence in subsequent years. In H1 2026, two out of the four S&P 500 companies that failed in 2025 achieved majority support in 2026. For the Russell 3000, 22 out of the 25 companies that failed in 2025 managed to pass their Say on Pay votes in 2026. However, the level of support for these returning companies showed mixed results. Only one of the two S&P 500 companies that previously failed and subsequently passed in H1 2026 achieved over 70% support, a decline from all four such companies in H1 2025. For the Russell 3000, 17 out of the 22 companies that failed in 2025 and passed in 2026 secured over 70% support, an increase from 12 out of 18 in H1 2025.
Furthermore, of the 21 Russell 3000 companies that experienced failed Say on Pay votes in H1 2026, three had also failed in the preceding year, and an additional eight had received less than 70% support in the prior year. This indicates a growing number of companies facing persistent shareholder concerns regarding their compensation practices. For the first time in over five years, half of the S&P 500 companies that experienced failed votes did not achieve majority support in the following year, highlighting a potential shift in investor tolerance for persistent compensation issues.
B. ISS’s Approach to Say on Pay Evaluations and Its Impact
Institutional Shareholder Services (ISS), a leading proxy advisory firm, plays a pivotal role in shaping shareholder voting outcomes on executive compensation. The 2026 proxy season continued to demonstrate the significant influence of ISS recommendations. Say on Pay proposals that received a negative recommendation from ISS experienced substantially lower shareholder support compared to those endorsed by the firm. Specifically, proposals with negative ISS recommendations saw approximately 28% less support on average among S&P 500 companies and 21% less support among Russell 3000 companies, relative to proposals ISS supported.
The primary drivers behind ISS’s negative recommendations in H1 2026 were consistent with prior years, with a particular emphasis on the misalignment between CEO pay and shareholder returns. Other key concerns included the use of limited, opaque, or undisclosed performance goals; one-off awards leading to inflated executive compensation; and the reliance on subjective criteria for compensation determination. ISS indicated its continued focus on these performance and size-related compensation issues for the 2027 proxy season, citing ongoing global economic uncertainties.
In H1 2026, ISS issued negative recommendations to 36 S&P 500 companies, a slight decrease from 40 in H1 2025. The most frequent reason for these negative recommendations was "Pay for Performance" concerns, which were flagged as a "high" concern in 33 companies, an increase from 32 in H1 2025. Compensation committee communication and responsiveness also emerged as a notable concern, with "high" concern ratings in six companies, up from five in H1 2025. Conversely, concerns related to severance/change in control arrangements decreased from five in H1 2025 to three in H1 2026. Non-performance based pay elements remained consistent at three companies, and peer group benchmarking concerns saw a decline from one company in H1 2025 to zero in H1 2026.
ISS employs a multi-pronged approach to assess executive compensation, with a critical factor being the alignment of pay with performance. While pay for performance is a significant component, it is not the sole determinant. Other areas of ISS scrutiny include compensation committee communication and responsiveness, severance and change-in-control arrangements, non-performance-based pay elements, and peer group benchmarking. The data indicates that pay for performance remains the most prevalent criterion associated with negative ISS recommendations, exceeding other factors by a substantial margin. The percentage of negative recommendation reports citing "high" concern regarding pay for performance increased to 92% in H1 2026, up from 80% in H1 2025.
ISS also highlighted issues with compensation committee communication and responsiveness, emphasizing the importance of proactive engagement with shareholders. One company received a "high" concern rating solely on this criterion, despite having "low" quantitative and qualitative concern regarding pay for performance. This underscores the interconnectedness of these factors in ISS’s evaluation process.
Severance remained a prevalent issue in compensation-related shareholder proposals, despite a significant decrease in the overall number of such proposals submitted in H1 2026. ISS continued to identify severance arrangements as an area of concern, assigning "high" concern ratings to three companies with negative Say on Pay recommendations in H1 2026.
C. Detailed Analysis of ISS’s Pay for Performance Policies in H1 2026
ISS’s methodology for evaluating pay for performance has remained largely consistent since 2012, involving a two-step process: a quantitative analysis followed by a qualitative review. The quantitative analysis assesses both the relative and absolute alignment of pay with performance. Even if a company receives a "low" concern rating from this initial quantitative screen, ISS proceeds to a qualitative review of the Compensation Discussion and Analysis (CD&A) and incentive programs for any noteworthy issues that may warrant investor attention. Problematic incentive designs, such as multiyear guaranteed payments, discretionary pay components, excessive perquisites, or the absence of rigorous performance goals, can lead to a "high" overall concern rating for pay for performance, even if the initial quantitative assessment was favorable.
The alignment of CEO pay with relative Total Shareholder Return (TSR) continues to be the most critical quantitative factor underpinning ISS’s negative recommendations. The quantitative analysis employs four measures, which were subject to minor modifications in December 2025:
- Relative Degree of Alignment (RDA): This measures how a company’s pay aligns with its peer group’s TSR over a specified period.
- Multiple of Median (MOM): This assesses the ratio of a company’s CEO pay to the median pay of its peer group.
- Pay TSR Alignment (PTA): This examines the correlation between pay and TSR over a defined period.
- Financial Performance Alignment (FPA): This metric, introduced as a potential modifier, evaluates a company’s performance against predetermined financial targets.
ISS establishes "medium" and "high" concern thresholds for these measures, with slightly different benchmarks for S&P 500 companies compared to non-S&P 500 companies. For non-S&P 500 companies, "medium" concern thresholds include a relative degree of alignment of negative 54 and a multiple of median of 2.33x, while "high" concern thresholds are negative 64 and 3.40x, respectively. The Pay TSR Alignment thresholds are negative 30% for "medium" concern and negative 45% for "high" concern.
For S&P 500 companies, these thresholds are marginally lower, reflecting greater investor scrutiny of executive compensation within large-cap corporations. The "medium" concern thresholds for S&P 500 companies include a relative degree of alignment of negative 54 and a multiple of median of 2.04x, with "high" concern thresholds at negative 64 and 2.99x, respectively. The Pay TSR Alignment thresholds remain consistent at negative 30% and negative 45%.
ISS then assigns an initial quantitative score, with multiple "medium" concern levels potentially equating to an overall "high" quantitative concern. The FPA score can act as a modifier, potentially escalating a "medium" concern to "high" concern under specific circumstances, such as a company having a "medium" concern under any of the three primary measures, a "low" concern bordering on "medium," or a single elevated concern with poor FPA performance.
In H1 2026, ISS placed a slightly greater emphasis on quantitative pay-for-performance factors. Fourteen companies out of the 36 that received a negative Say on Pay recommendation did so despite only attracting "low" overall concern on the quantitative screen. This figure, while down from 19 in H1 2025, remains higher than the 10 companies in H1 2024, suggesting a more pronounced focus on quantitative metrics. Three of these companies faced negative recommendations despite "low" concern ratings on both quantitative and qualitative screens, indicating that even strong qualitative performance might not always offset quantitative deficiencies.
The impact of the FPA as a modifier was mixed. No companies moved from "low" to "medium" concern due to the FPA in H1 2026, a decrease from three in H1 2025. One company moved from "medium" to "high" concern, down from two in H1 2025. Thirty-one companies maintained their concern level after the quantitative tests.
The qualitative review by ISS encompasses a range of factors, with limited, opaque, or undisclosed performance goals being the most frequently cited issue in H1 2026. This concern was raised for 27 of the 36 S&P 500 companies receiving negative recommendations, consistent with the 27 companies flagged in H1 2025. The persistent emphasis on this factor aligns with ISS’s focus on pay-for-performance alignment.
The granting of one-off awards leading to high executive compensation emerged as the second most frequently cited qualitative factor. Over half of the S&P 500 companies with negative recommendations (25 out of 36) were cited for providing large recruitment, retention, performance, or other off-cycle awards. This indicates ISS’s continued scrutiny of significant one-time awards, particularly when they contribute to elevated executive pay without a compelling rationale or robust disclosure.
The use of subjective information in determining compensation also saw increased criticism in H1 2026, with 23 out of 36 companies being faulted for relying on subjective criteria. This marks a significant increase from 11 companies in H1 2025. ISS frequently pointed to compensation programs that permitted committee discretion or subjective assessments without clearly defined performance goals, metric weightings, or payout opportunities, underscoring a push for greater objectivity and transparency in incentive compensation design.
D. SEC Proposal to Scale Executive Compensation Disclosure Requirements
A significant regulatory development during H1 2026 was the SEC’s proposal to substantially revise executive compensation disclosure requirements. Announced on May 19, 2026, the proposal aims to simplify reporting obligations for a large segment of public companies by reclassifying most companies as "non-accelerated filers." Under the proposed framework, companies other than "large accelerated filers" would be considered "non-accelerated filers," benefiting from scaled disclosure accommodations currently available to smaller reporting companies and emerging growth companies. The SEC estimates that approximately 81% of reporting companies would fall under this new non-accelerated filer classification.
For executive compensation disclosures, non-accelerated filers would be required to provide only two years of Summary Compensation Table information, covering three named executive officers instead of the current five. Crucially, these companies would be exempt from providing a Compensation Discussion and Analysis (CD&A), CEO pay ratio disclosure, and pay-versus-performance disclosure. Numerous existing compensation tables, including those detailing grants of plan-based awards, option exercises and stock vested, pension benefits, and nonqualified deferred compensation, would also become optional. Furthermore, non-accelerated filers would be exempt from the mandatory advisory votes on Say on Pay, Say on Pay Frequency, and Golden Parachute arrangements.
If adopted, this proposal would represent a considerable reduction in disclosure and voting requirements for a substantial majority of U.S. public companies. The potential implications include a decrease in the compliance burden and associated costs for these companies. However, it also raises questions about the extent of transparency and shareholder oversight that will be maintained for a significant portion of the market. The proposal is subject to further SEC review, and the final rules’ scope and timing remain uncertain. This initiative reflects a broader regulatory trend towards tailoring disclosure requirements based on company size and complexity, aiming to reduce regulatory burdens while maintaining investor protection.
E. Equity Compensation Plan Voting Trends
Shareholder voting on equity compensation plans, which are crucial for aligning employee and executive interests with those of shareholders, remained largely consistent with previous years. In H1 2026, average support for proposals to adopt or amend omnibus stock plans was 92% among S&P 500 companies and 87% among Russell 3000 companies. These figures are broadly in line with the 90% and 88% recorded in H1 2025, respectively, indicating continued shareholder endorsement of equity-based incentives.
The number of proposals voted on saw an increase in H1 2026 compared to the previous year. For the S&P 500, 101 proposals were voted on, up from 92 in FY 2025. The Russell 3000 saw 631 proposals, a slight decrease from 667 in FY 2025.
ISS recommendations against equity plan proposals saw a slight uptick. ISS recommended against 36% of equity plan proposals for Russell 3000 companies in H1 2026, up from 34% in H1 2025. For S&P 500 companies, the percentage of negative recommendations was 24%, a marginal increase from 23% in H1 2025. Reasons cited by ISS for negative recommendations at S&P 500 companies included broad discretionary accelerated vesting authority, excessive plan costs, liberal share recycling policies, and incomplete or discretionary change-in-control vesting treatments.
Despite the increase in negative recommendations from ISS, the impact on shareholder approval rates remained minimal. All proposals at S&P 500 companies received majority support, mirroring H1 2025. For the Russell 3000, only five plans failed to achieve majority support, a slight increase from two in H1 2025.
The influence of ISS recommendations on the level of support was still evident. At S&P 500 companies, average support for equity plan proposals was 96% when ISS recommended "for" approval, and 78% when ISS recommended "against." These figures are consistent with H1 2025, where support was 96% for "for" recommendations and 72% for "against" recommendations.
ISS employs an "equity scorecard" approach to assess equity plans, considering factors across three main categories: plan cost, grant practices, and company performance. This methodology, along with specific passing scores for different market indices, guides ISS’s recommendations. While the scorecard is a primary tool, certain "egregious" plan features, such as liberal change-of-control definitions that could trigger vesting upon less than a full double trigger, can lead to a negative ISS recommendation irrespective of the scorecard score. The overall stability in shareholder support for equity compensation plans suggests that companies continue to effectively communicate the value of these incentives, even as proxy advisors maintain vigilant oversight.
