September 29, 2026
The 2026 proxy season concluded with a robust display of shareholder engagement on executive compensation, marked by consistently strong "Say on Pay" results, a refined approach by proxy advisory firms, and significant regulatory proposals. While overall shareholder support for executive compensation plans remained high, a deeper analysis reveals nuanced trends in how performance is evaluated, how advisory services influence voting, and the evolving landscape of disclosure requirements. This review delves into the key compensation-related matters from the first half of 2026, offering insights into the prevailing sentiments and anticipated shifts in corporate governance.
Summary of Key Trends
The first half of the 2026 proxy season underscored several critical trends in executive compensation. Shareholder approval of "Say on Pay" proposals continued to be a dominant theme, with consistently high approval rates across major market indices. Proxy advisory firms, particularly Institutional Shareholder Services (ISS), maintained a significant influence on voting outcomes, with their recommendations often correlating closely with shareholder decisions. A key focus for ISS and shareholders alike remained the intricate link between executive pay and company performance, leading to increased scrutiny of performance metrics and incentive structures. Concurrently, regulatory bodies like the Securities and Exchange Commission (SEC) explored potential adjustments to disclosure requirements, signaling a move towards streamlining reporting for certain companies. Finally, the voting on equity compensation plans, a vital tool for aligning executive and shareholder interests, also demonstrated steady shareholder support, albeit with variations influenced by ISS recommendations and specific plan designs.
A. Strong Say on Pay Results
Shareholder confidence in executive compensation packages, as measured by "Say on Pay" votes, remained remarkably high throughout the first half of 2026. The number of failed "Say on Pay" votes—those failing to garner majority support—stayed at historically low levels. Among the S&P 500 companies, only four proposals failed to achieve majority approval, a slight decrease from five in the same period of 2025. Similarly, the Russell 3000 index saw 21 failed proposals, down from 27 in the prior year. This trend represents a 12-year low for the Russell 3000, indicating a sustained period of shareholder approval for executive pay structures.
Across both indices, an overwhelming 99% of "Say on Pay" proposals secured majority shareholder support in H1 2026, a figure consistent with the 99% seen in H1 2025 and H1 2024. The average shareholder support for these proposals saw a marginal increase, rising to 91% for the S&P 500 and 92% for the Russell 3000, up from 90% and 91% respectively in H1 2025.
A deeper dive into industry-specific data for the S&P 500 revealed variations in shareholder sentiment. Companies within the communication services sector experienced the lowest average support, around 74%, while those in the energy and materials sectors garnered the highest, approximately 95%. The sectors experiencing failed "Say on Pay" votes in H1 2026 included healthcare, technology, communication services, and real estate, a slight shift from the prior year’s composition which included the industrial sector.
B. Turnover in Failed Votes Declined, Indicating "Stickier" Negative Votes
Despite the overall strength in "Say on Pay" results, a closer examination of companies that failed to secure majority support in previous years revealed a shift in voting patterns. In H1 2026, the rate of year-over-year improvement for companies with prior failed votes declined. Of the S&P 500 companies that failed in 2025, two out of four achieved majority support in 2026. For the Russell 3000, 22 out of 25 companies that failed in 2025 subsequently passed in 2026. This turnover rate was lower than in H1 2025, where 50% of S&P 500 companies and 95% of Russell 3000 companies with prior failed votes saw their proposals pass.
Furthermore, the quality of renewed support also showed a trend. Only one of the two S&P 500 companies that had previously failed and subsequently passed in H1 2026 achieved over 70% support, a stark contrast to all four in H1 2025. For the Russell 3000, 17 out of the 22 companies that transitioned from failure to success received over 70% support, a slight increase from 12 out of 18 in H1 2025.
A concerning trend for some companies was the persistence of negative sentiment. Three companies in the Russell 3000 experienced a second consecutive failed "Say on Pay" vote in H1 2026, and an additional eight companies saw their support levels remain below 70%. This indicates a growing proportion of companies struggling to regain shareholder confidence after initial dissent, with nearly half of S&P 500 companies that failed in the prior year unable to secure majority approval in 2026, a phenomenon not observed in over five years.
C. Overall ISS Approach on Say on Pay Evaluation
Institutional Shareholder Services (ISS) continued to exert considerable influence on "Say on Pay" voting outcomes in H1 2026. Proposals that received a negative recommendation from ISS experienced significantly lower shareholder support. On average, these proposals garnered 28% less support among S&P 500 companies and 21% less support among Russell 3000 companies compared to those ISS endorsed. This highlights the critical role ISS plays in shaping shareholder decisions on executive compensation.
The primary drivers behind ISS’s negative recommendations in 2026 were consistently identified as a misalignment between CEO pay and shareholder return, coupled with issues such as limited, opaque, or undisclosed performance goals, one-off awards leading to inflated executive compensation, and the subjective nature of compensation determination. Given the ongoing global economic uncertainties, ISS is expected to maintain its focus on these performance and size-related compensation concerns in the upcoming 2027 proxy season.
In H1 2026, ISS issued negative recommendations for 36 S&P 500 companies, a decrease from 40 in H1 2025. The most prominent concern driving these negative recommendations was "Pay for Performance," cited in 33 instances, an increase from 32 in the prior year. This underscores the persistent shareholder and proxy advisor demand for demonstrable links between executive compensation and financial outcomes. "Compensation Committee Communication and Responsiveness" was another significant factor, with six companies receiving high concern ratings in this area, up from five in H1 2025, emphasizing the importance of proactive engagement with shareholders on compensation matters. Concerns regarding "Severance/Change in Control Arrangements" saw a decrease, noted in three instances compared to five in H1 2025.
ISS employs a multi-faceted approach to evaluating "Say on Pay" proposals, utilizing five key criteria: Pay for Performance, Compensation Committee Communication and Responsiveness, Severance/Change in Control Arrangements, Non Performance Based Pay Elements, and Peer Group Benchmarking. A "high," "medium," or "low" level of concern is assigned to each criterion. "Pay for Performance" consistently emerges as the most significant factor correlating with negative ISS recommendations, impacting over 92% of negative recommendation reports in H1 2026. This dominance has been a consistent theme in recent years.
The ISS analysis also flagged issues with compensation committee communication and responsiveness. Six companies received a negative recommendation coupled with a "high" concern rating for communication and responsiveness. Notably, one of these companies had a "low" concern rating for pay for performance, indicating that communicative shortcomings can independently trigger negative recommendations, even when pay-for-performance alignment is otherwise deemed acceptable.
Severance arrangements, while seeing a reduction in "high" concern ratings from ISS (three companies in H1 2026 versus five in H1 2025), remained a prevalent issue in compensation-related shareholder proposals. This aligns with broader shareholder activism trends where changes to severance policies continue to be a focal point.
D. Details on ISS’s Application of its Pay for Performance Policies in H1 2026
ISS’s methodology for assessing pay for performance has remained largely consistent since its introduction in the 2012 proxy season, prioritizing a quantitative analysis of pay-performance alignment. This analysis involves evaluating both relative and absolute alignment of pay with performance metrics. Even if a company achieves a "low" concern rating from the quantitative model, ISS conducts a qualitative review of the Compensation Discussion and Analysis (CD&A) and incentive programs for any noteworthy issues. Problematic incentive designs, such as guaranteed multiyear payments, discretionary pay components, excessive perquisites, or a lack 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 quantitative analysis employs four key measures, which underwent minor modifications in December 2025:
- Relative Degree of Alignment (RDA): Measures the alignment of CEO pay with relative total shareholder return (TSR) over a defined period.
- Multiple of Median (MOM): Compares the company’s CEO pay to the median pay of its peer group.
- Pay TSR Alignment (PTA): Assesses the alignment of CEO pay with TSR over a defined period.
- Financial Performance Alignment (FPA): Evaluates the alignment of CEO pay with financial performance metrics.
Thresholds for "medium" and "high" concern levels are established for these measures, with slightly lower thresholds for S&P 500 companies reflecting increased investor scrutiny on large-cap compensation. ISS then assigns an initial quantitative score, which can be modified by the FPA score. The FPA can elevate a "medium" concern to "high" if a company exhibits poor FPA performance, or it can influence companies with "low" concerns bordering on "medium" or those with a single elevated concern under the primary measures.
In H1 2026, 14 out of 36 companies receiving a negative recommendation had only a "low" overall concern on the quantitative screen, suggesting a slightly increased emphasis on quantitative factors compared to H1 2025 (19 out of 40) but remaining higher than H1 2024 (10 out of 34). Three of these companies faced negative recommendations despite "low" concern ratings on both quantitative and qualitative screens, indicating a more stringent application of ISS’s quantitative methodology.
The impact of the FPA modifier was mixed in H1 2026. No companies moved from "low" to "medium" concern due to the FPA, compared to three in H1 2025. One company transitioned from "medium" to "high" concern, down from two in H1 2025. The majority of companies (31) maintained their concern level after the quantitative tests.
The qualitative review by ISS encompasses several factors, with "limited, opaque, or undisclosed performance goals" remaining the most frequently cited concern. This issue was raised for 27 of the 36 S&P 500 companies receiving negative recommendations, consistent with the 27 of 40 in H1 2025. This persistent concern aligns with ISS’s emphasis on pay-for-performance alignment.
"One-off awards resulting in high executive compensation" emerged as the second most frequently cited qualitative factor. More than half of the S&P 500 companies with negative recommendations (25 out of 36) were flagged for large recruitment, retention, performance, or other off-cycle awards, an increase from 22 out of 40 in H1 2025. This indicates ISS’s heightened scrutiny of large, non-recurring awards, particularly when they significantly boost executive pay without a clear rationale or robust disclosure.
The use of subjective information to determine compensation also saw an increased focus, with 23 out of 36 companies criticized for this in H1 2026, a substantial rise from 11 out of 40 in H1 2025. ISS often faulted compensation programs that relied heavily on committee discretion or subjective assessments without clearly defined performance metrics, weightings, or payout opportunities. This trend reflects ISS’s commitment to promoting objective, transparent, and easily understandable performance criteria in incentive compensation.
Other qualitative concerns identified by ISS included issues with peer group benchmarking, the structure of incentive plans, and the presence of excessive perquisites.
E. SEC Proposal to Scale Executive Compensation Disclosure Requirements
A significant development during the 2026 proxy season was the U.S. Securities and Exchange Commission’s (SEC) proposal to significantly alter executive compensation disclosure requirements for a substantial portion of public companies. On May 19, 2026, the SEC put forth a proposal to reclassify reporting companies, designating all entities other than "large accelerated filers" as "non-accelerated filers." This reclassification would extend scaled disclosure accommodations, currently available to smaller reporting companies and emerging growth companies, to this broader group. The SEC estimates that approximately 81% of all reporting companies would fall under the new "non-accelerated filer" status.
Under this proposed framework, non-accelerated filers would face considerably reduced executive compensation disclosure obligations. These would include providing only two years of Summary Compensation Table data for three named executive officers, a reduction from the current five named executive officers. Crucially, these companies would be exempt from providing a Compensation Discussion and Analysis (CD&A), CEO pay ratio disclosure, and pay-versus-performance disclosure. Additionally, numerous existing compensation tables, such as those detailing grants of plan-based awards, option exercises, pension benefits, and nonqualified deferred compensation, would become optional. Furthermore, non-accelerated filers would be relieved of the mandatory requirements to hold advisory votes on "Say on Pay," "Say on Pay Frequency," and "Golden Parachute" arrangements.
If adopted, this proposal would mark a substantial reduction in the executive compensation disclosure and related shareholder voting burdens for the majority of U.S. public companies. The proposal is currently undergoing SEC review, and the final scope and implementation timeline remain uncertain. This potential regulatory shift could significantly alter the reporting landscape for many companies, impacting transparency and shareholder engagement on executive compensation matters.
F. Equity Compensation Plan Voting
Shareholder approval of equity compensation plans remained a generally uncontroversial matter in H1 2026, with strong support continuing to be the norm. U.S.-listed companies are typically required by stock exchange rules to seek shareholder consent for plans governing the issuance of equity-based compensation to employees, directors, and other service providers. This practice is widely viewed as a critical mechanism for aligning the interests of management and employees with those of shareholders.
In H1 2026, average support for equity compensation plan proposals reached approximately 92% among S&P 500 companies and 87% among Russell 3000 companies. These figures are broadly consistent with the 90% and 88% recorded in H1 2025, respectively. The number of proposals voted on saw an increase, with 101 proposals for the S&P 500 (up from 92 in FY 2025) and 631 for the Russell 3000 (down from 667 in FY 2025).
ISS maintained its "equity scorecard" approach to evaluating these plans, a methodology that has been in place since 2015. This scorecard assesses plans based on factors across three main categories: plan cost, plan generosity, and plan features. While ISS recommendations against these proposals saw a slight uptick, with 36% of Russell 3000 proposals receiving negative recommendations (up from 34% in H1 2025) and 24% of S&P 500 proposals receiving negative recommendations (up from 23% in H1 2025), these did not translate into widespread failures.
For S&P 500 companies, negative ISS recommendations cited reasons such as broad discretionary accelerated vesting authority, excessive plan costs, liberal share recycling policies, and incomplete or discretionary change-in-control vesting treatment. Despite these recommendations, all equity plan proposals at S&P 500 companies secured majority shareholder support. Among Russell 3000 companies, five plans failed to achieve majority support, an increase from two in H1 2025.
The impact of ISS recommendations, while not significantly affecting pass rates, continued to influence the magnitude of shareholder support. For S&P 500 companies, average support was 96% when ISS recommended "for" approval, and 78% when ISS recommended "against." This gap widened slightly from H1 2025, where support was 96% for "for" recommendations and 73% for "against" recommendations, underscoring the persuasive power of ISS’s analysis even when it doesn’t lead to outright rejection of a plan. The five Russell 3000 companies that failed to pass their equity plans all received negative ISS recommendations. These included Quanterix Corporation (just below 29%), Pacira Biosciences, Inc. (just below 44%), Alto Neuroscience, Inc. (47%), CuriosityStream Inc. (just below 49%), and Sidus Space, Inc. (50%). This outcome highlights that while shareholder support for equity plans is generally strong, specific plan features and ISS scrutiny can lead to adverse outcomes, particularly within the broader market indices.
