The 2026 proxy season has profoundly disrupted long-held assumptions for corporate issuers, activist investors, and their advisors, revealing a more complex and destabilizing environment than initially anticipated. Far from signaling a retreat of shareholder activism or a rollback of ESG-driven governance, the current landscape is characterized by a significant fracturing of shareholder voting blocs, altering the traditional dynamics of corporate influence and decision-making.
For over a decade, issuers and proxy solicitors have relied on predictable "centers of gravity" to model vote outcomes with a reasonable degree of certainty. These anchors included the benchmark policies of proxy advisory firms, the cohesive stewardship practices of large passive asset managers, and a relatively stable framework for shareholder proposal adjudication. However, in 2026, these foundational elements are demonstrably loosening. A confluence of legal challenges, regulatory interventions, heightened political scrutiny, and market-driven adaptations is simultaneously eroding the influence of proxy advisors, splintering the voting blocs of passive investors, and decentralizing the decision-making processes within institutional stewardship teams. This article delves into the most consequential developments of the 2026 proxy season and examines the implications of this fractured landscape for issuers navigating an increasingly unpredictable corporate governance environment.
M&A Activism Remains a Dominant Force
Despite appearances suggesting a downturn, shareholder activism continues to thrive in 2026, particularly in the realm of Mergers & Acquisitions (M&A). As of June 1, 2026, only one proxy contest among companies with a market capitalization exceeding $250 million reached a vote. At Ingles Markets Incorporated, the dissident investor Summer Road, LLC, successfully elected its sole nominee. In contrast, six other contests within the same market capitalization range were settled, with five of these resulting in the activist securing at least one board seat. Three contests were withdrawn without any agreements or board seats, and one activist’s nominations were deemed invalid. Separately, Biglari Holdings initiated a "withhold" campaign against two incumbent directors at Jack in the Box, following the prior withdrawal of its director nominees. Biglari also sought to defeat certain management proposals, though shareholders ultimately sided with management, approving all recommended proposals and electing all of management’s nominees. Currently, six director proxy contests and one "withhold" campaign at Victoria’s Secret are still pending.
Beyond traditional proxy contests, activism is flourishing through other means. Barclays’ Q1 2026 Review of Shareholder Activism reported that 41 activism campaigns were announced at U.S. companies during the period, marking a slight year-over-year increase and representing approximately 66% of all global campaigns. This contrasts sharply with a dramatic decrease in activism observed in Europe and the Asia-Pacific region during the same timeframe.
Large, well-established activist funds no longer necessarily require proxy fights or director nominations to achieve their objectives. Norwegian Cruise Line, for instance, appointed five independent directors to its Board after Elliott Management publicly urged the company to add new directors and implement a new business plan. Similarly, Six Flags appointed a new Chair following public calls from JANA Partners to consider a sale and appoint new leadership. Even private nominations and demands are proving effective. At Fortune Brands, Garden Investments privately nominated a director slate and advocated for a new CEO succession plan, which soon led to the company backtracking on a previously announced CEO candidate and appointing a Garden employee to its Board.
The preference for settlements between companies and activists is also on the rise. According to Barclays, activists secured 41 out of 45 board seats through settlements in Q1. This trend is largely attributed to the increased uncertainty in predicting vote outcomes following the introduction of universal proxy cards, which allow shareholders to mix and match candidates from both company and activist slates, as well as recent shifts in the postures of institutional investors and proxy advisory firms.
M&A activism continues to be a significant trend, despite a minor Q1 reduction attributed to market volatility. The M&A market has experienced a substantial boom, with $2.5 trillion in deals announced in the first five months of 2026, a 39% year-over-year increase according to Dealogic. This robust activity is expected to fuel further M&A-focused activism. Activist demands in M&A vary by company size. Larger companies often face calls for "pure-play" structures, which may involve corporate breakups, spin-offs of divisions, portfolio simplification, or the evaluation of strategic alternatives. Smaller companies typically see activist pressure focused on outright sales, including the initiation of auction processes. Activists also frequently oppose announced transactions deemed unfavorable to shareholders. In 2025, Diligent reported that M&A transactions at over 30 public companies faced public opposition from investors, an increase from 19 in 2024. In January 2026, STARR Surgical’s proposed deal with Alcon AG failed to garner sufficient shareholder support, partly due to opposition from Broadwood Partners, a long-term investor holding 27.5% of the company, who cited concerns over valuation and a flawed Board process, even threatening a special meeting to remove directors. Similarly, Core Scientific’s proposed acquisition by CoreWeave was voted down in 2025, with Two Seas Capital, a 6.2% holder, actively campaigning against the deal, arguing it undervalued the company and advocating for a standalone strategy. Blackstone and management’s proposed take-private of TaskUs also failed to gain shareholder approval after Think Investments and Murchison Ltd., collectively holding 25% of the company, announced their opposition.
Activists are also acting as catalysts in bidding wars. Following Warner Brothers Discovery’s initial deal with Netflix, Paramount Skydance announced a competing offer and threatened a proxy fight at Warner’s 2026 Annual Meeting. Netflix subsequently revised its offer to an all-cash proposal, while hedge fund activist Ancora reportedly considered a proxy fight, citing Warner’s perceived failure to engage with Paramount. Paramount eventually increased its offer and improved its terms, prompting Warner to announce that the enhanced proposal could lead to a superior offer. Netflix subsequently withdrew from further bidding, and Warner shareholders ultimately approved the Paramount transaction in April.
Regulatory Headwinds and Shifting Investor Dynamics Fragment Shareholder Power
The most defining narrative of the 2026 proxy season has been the fragmentation of historically predictable, institutionally anchored voting blocs. Previously, a reliable calculus for vote outcomes could be derived from the influence of proxy advisory firms like ISS and Glass Lewis, and the generally Board-deferential stewardship postures of the largest index funds. This calculus, however, has become significantly less reliable in 2026 due to a series of legal, regulatory, and market forces.
The Intensifying Regulatory and Legal Pressure on Proxy Advisors
The proxy advisory industry has faced increasing regulatory scrutiny, but the current environment presents a qualitatively different threat that strikes at the core of the business model. In July 2025, the U.S. Court of Appeals for the D.C. Circuit invalidated the SEC’s 2020 proxy advisor rules, ruling that proxy advisor recommendations do not constitute "solicitations" subject to the proxy rules under the Securities Exchange Act of 1934. While a legal victory for ISS and Glass Lewis, this decision has opened the door to a more consequential wave of federal and state-level actions, often premised on the theory that "foreign-owned" proxy advisors exert significant voting influence without adequate accountability or transparency.
In December 2025, Executive Order 14366 mandated heightened scrutiny of the proxy advisory industry, with particular attention to the role of ESG and DEI considerations in voting recommendations. The SEC continues to examine whether proxy advisor recommendations that fail to accurately disclose their methodological assumptions, including the weighting of non-financial factors, could lead to liability under federal securities laws’ anti-fraud provisions. The Executive Order also proposed requiring proxy advisors to register as investment advisers under the Investment Advisers Act of 1940, which would impose fiduciary, compliance, and disclosure obligations. Glass Lewis has already announced its voluntary registration with the SEC as an investment adviser, while ISS is already registered. Furthermore, proposed interpretations of Sections 13(d) and 13(g) of the Exchange Act may necessitate beneficial ownership disclosures from proxy advisors and their institutional investor subscribers when aggregated voting influence crosses statutory thresholds, a potential fundamental shift in institutional voting practices.
Adding to this regulatory pressure is a growing antitrust focus on the proxy advisory industry. The Federal Trade Commission has initiated two separate investigations into whether the "duopoly" of ISS and Glass Lewis harms competition. Concurrently, the Department of Labor issued guidance under the Employee Retirement Income Security Act (ERISA) that poses a risk of fiduciary breaches for proxy advisors and asset managers who rely on their recommendations if DEI and ESG factors are considered. This guidance reflects a view that non-financial considerations, including ESG criteria, are inappropriate for fiduciaries when making voting decisions. If enacted, such a rule could expose institutional investors subject to ERISA to breach of fiduciary duty claims if they rely on ISS or Glass Lewis recommendations without independent analysis of the advisors’ underlying methodologies.
State-level actions have also joined the regulatory fray. Florida has sued ISS and Glass Lewis for alleged violations of deceptive and unfair trade practices statutes, asserting that their coordinated influence constitutes an unlawful restraint of trade. Texas Senate Bill 2337 would require proxy advisors to disclose whether recommendations are based on non-financial factors, including ESG considerations. Although ISS and Glass Lewis secured a preliminary injunction against SB 2337’s enforcement, litigation is ongoing, while Egan-Jones, a third proxy advisor, already adheres to the statute’s requirements. Texas has also sued ISS and Glass Lewis for allegedly misleading investors, claiming the firms prioritize their own ESG agendas over the fiscal well-being of their subscribers. Indiana and Kansas have similarly enacted statutes requiring proxy advisors to disclose when recommending against management if such recommendations are based on factors beyond pure financial analysis. Egan-Jones has announced its intention to comply with these statutes starting July 1, 2026.
Crucially, these proposed laws often characterize ESG considerations as non-pecuniary, undermining a core tenet of proxy advisor and passive institutional orthodoxies: that good governance, including material social and environmental factors, enhances long-term shareholder value. Given that governance considerations underpin most proxy advisor voting policies, the enforcement of this patchwork of state regulatory requirements could necessitate state-specific disclosures for nearly every recommendation, presenting significant operational and financial challenges for the proxy advisory industry.
At the federal level, Congress has introduced three separate bills that could fundamentally transform the proxy advisor industry. The "Protecting Americans’ Retirement Savings from Politics Act" would require proxy advisors to register with the SEC and disclose their methodologies and conflicts of interest, prioritize economic factors unless explicitly requested otherwise by subscribers, and limit institutional investor "robovoting" (i.e., blindly following proxy advisor recommendations). The "Stopping Proxy Advisor Racketeering Act" would prohibit proxy advisors from issuing voting recommendations for proposals if they provide consulting services to the issuer, engagement services to the shareholder proponent, or are part of a group supporting similar proposals—a broad net that could encompass organizations promoting ESG initiatives. Finally, the Senate’s "Corporate Governance Fairness Act" would mandate SEC registration and targeted SEC examinations for conflicts of interest. Regardless of whether these bills advance, their introduction signals a challenging legislative environment for the industry, potentially downgrading ISS and Glass Lewis from primary decision drivers to mere inputs with diminished influence on investor voting.
The Splintering of the Passive Investor Vote: Regulatory Pressure and Internal Restructuring
The passive investor landscape is undergoing a parallel transformation. Revised SEC guidance on Sections 13(d) and (g) of the Exchange Act has renewed scrutiny of whether large passive managers engaging with issuers on topics where they have voted against management are deemed to "influence the control of the issuer." This interpretation, which could compel large passive investors to file Schedule 13D, has chilled engagement between issuers and index funds and could significantly alter the governance-focused stewardship model at these funds.
Informal proposals advocating for "mirror voting"—requiring passive investors to vote their shares proportionally to their underlying investors’ instructions—continue to gain traction. Mirror voting would effectively disenfranchise stewardship teams, shifting voting power to underlying holders, despite their modest participation in pass-through voting programs.
Vanguard’s $29.5 million settlement with Texas and ten other Republican-led states, stemming from its application of climate-focused voting policies to coal-related portfolio companies, serves as a prime example of the burgeoning legal exposure faced by index funds when their stewardship activities are perceived to prioritize ESG objectives over financial returns. While Vanguard’s settlement terms largely align with industry norms, the settlement highlights how state attorneys general can leverage antitrust, consumer protection, and fiduciary laws against asset managers.
In response to regulatory and political pressures, the 2026 proxy season saw BlackRock, Vanguard, and State Street each operating with multiple internal stewardship teams. Each of these index funds has bifurcated its stewardship team, separating policy, voting, and engagement functions. They have divided their votable shares among these teams based on firm-specific criteria, aiming to ensure that no single team controls more than 5% of an issuer’s outstanding shares. While these separate stewardship teams engage with issuers independently and may develop distinct objectives, their voting policies are often observed to align. However, as these teams evolve their own voting policies over time, the historically monolithic, management-friendly passive fund voting bloc may splinter, leading to vote outcomes influenced by multiple stewardship teams with increasingly divergent policies, which may not consistently favor management.
Proxy Advisors and Institutional Investors Shift Away from Benchmark Reliance
The market is adapting to regulatory and political pressures on proxy advisors in ways that may prove durable. Two major asset managers, JPMorgan and Wells Fargo, have announced their intention to cease relying on external proxy advisor recommendations, opting instead for proprietary internal voting systems. JPMorgan has developed an AI-driven platform to manage its proxy voting, while Wells Fargo has customized its voting infrastructure using Broadridge’s systems.
ISS and Glass Lewis are also adapting their offerings. ISS has introduced Gov360, a research and analytics product providing governance analysis without a specific vote recommendation. ISS has also launched Custom Lens, a customizable platform enabling clients to tailor underlying data, analytical frameworks, and recommendations to their own policy preferences. More significantly, Glass Lewis has announced its phasing out of its benchmark policy entirely in 2027, transitioning clients to custom or thematic policies and offering four distinct policy perspectives within a single integrated report. These changes suggest a decline in the influence of one-size-fits-all benchmark recommendations, which have historically underpinned the proxy advisors’ substantial impact on vote outcomes.
The Potential Rise of Retail Voting Power
While proxy advisors and large passive managers have traditionally dominated shareholder voting calculations, retail holders—who typically vote with management, if they vote at all—could emerge as a meaningful source of support for some issuers. ExxonMobil’s retail voting program serves as a prominent example of an issuer actively mobilizing its retail constituency. Under this program, retail holders can opt-in to vote with management on future proposals at annual meetings, effectively granting management a perpetual proxy that aligns their participation with Board recommendations without requiring active engagement at each meeting. Participating retail holders can choose to apply their standing voting instruction to all matters or all matters except contested director elections and M&A transactions. Issuers are still required to provide participants with proxy materials, and participants retain the right to vote contrary to their standing instructions at any time.
The underlying logic is straightforward: companies with substantial, stable retail holdings, including employees and former employees, can catalyze retail participation, creating a durable bulwark against the influence of proxy advisor-directed institutional votes and activist campaigns. However, issuers have been hesitant to adopt similar retail voting programs, with only one other public company, BigBear.ai, currently offering such a program.
The expansion of pass-through voting programs by Vanguard and other large index funds represents the other side of this dynamic. As more beneficial owners of index fund shares participate in these programs, the aggregate vote controlled by the fund’s stewardship team(s) should theoretically diminish. The composition of this retail vote, if it favors management, could materially shift outcomes on contentious proposals. However, based on current observations, pass-through voting has not yet significantly impacted stewardship voting at Vanguard, BlackRock, or State Street. While these funds offer pass-through voting to an increasing number of investors, a majority either do not opt-in or choose to align with the stewardship team’s vote. The ultimate impact hinges on whether issuers and index funds can scale their respective retail campaigns to achieve a transformative, rather than incremental, impact on voting results.
Shareholder Proposals Face SEC’s "No-Objection" Policy Uncertainty
On November 17, 2025, the SEC revised its no-action letter framework governing shareholder proposal exclusions. For the 2025-26 proxy season, the SEC indicated it would no longer adjudicate the merits of exclusion requests, except for exclusions based on state law. Instead, if an issuer presents a reasonable basis to exclude a proposal under Rule 14a-8, the SEC will not object to that decision, signaling a policy shift from substantive review to issuer deference.
Paradoxically, shareholder proposal exclusions have decreased in 2026 compared to 2025. A recent ISS study of shareholder proposals at Russell 3000 meetings between January 1 and May 15, 2026, found that 76% of proposals were included in proxy statements, 17% were omitted, and 7% were withdrawn or not presented, compared to 63%, 27%, and 10% respectively in 2025. These results are difficult to reconcile with a Republican-controlled SEC aiming to reduce issuer compliance burdens. Instead, the no-objection policy has seemingly complicated the shareholder proposal process for issuers, forcing them to confront increased litigation risk, reputational attacks, and more aggressive forms of shareholder activism.
Shareholders have responded with a barrage of federal lawsuits challenging the legality and efficacy of the no-objection policy. The Interfaith Center on Corporate Responsibility and As You Sow have sued to invalidate the policy, arguing it violates the Administrative Procedure Act. Shareholder proponents have also sued issuers to enjoin them from excluding their proposals. In one notable case, a federal court ordered BJ’s Wholesale Club to include the New York State Comptroller’s deforestation proposal in its proxy statement. Other issuers, including AT&T and Axon Enterprise, have settled similar litigation, agreeing to include proposals in their proxy statements.
Proponents have also threatened "no-slate" solicitations under Rule 14a-4 to compel issuers to include their proposals. Earlier in 2026, Trillium Asset Management announced that BJ’s Wholesale had agreed to include Trillium’s proposal calling for a report on greenhouse gas emissions, following BJ’s initial receipt of a no-objection letter. Trillium’s announcement highlighted that "When a proposal is omitted in this SEC-created vacuum, companies should be aware that they face multiple legal, governance, and reputational risks – including independent proxy solicitations," and that "attempts to exclude legitimate and valid shareholder proposals can trigger alternative, bylaw-based routes and the prospect of a broader ballot." While the Communications Workers of America announced its intent to launch a 14a-4 campaign for five governance-related proposals at Nextstar Media Group, they ultimately did not pursue that campaign.
Issuers also face increased scrutiny from proxy advisors. Glass Lewis’s Benchmark Policy currently states that "shareholders should be afforded the opportunity to vote on matters of material importance." While their policy does not explicitly threaten negative recommendations for excluding shareholder proposals, it notes that it could be "updated prior to or during the 2026 proxy season should [the SEC’s] approach to these matters change or regulatory developments warrant such an update." ISS has not issued a similar policy update, but The Deal reported that ISS initially recommended against the Chair of the Governance Committee at Alexandria Real Estate Equities after it excluded a shareholder proposal. ISS later revised its recommendation to "cautious support" after the issuer provided additional context for its exclusion rationale.
Historically, the previous no-action letter process provided a theoretically neutral forum where issuers and proponents respected the Staff’s determinations as final and binding, with litigation being rare. In the current no-objection era, the risk of further litigation, coupled with reputational damage and the potential ire of proxy advisors and shareholders, complicates the decision-making process for excluding shareholder proposals. These compounded risks, alongside the specter of broader activism, may explain why issuers are increasingly finding shareholder proposal fights to be not worth the trouble. The SEC now faces the critical decision of whether to reinstate the prior no-action letter process, materially amend the shareholder proposal rule, or withdraw the rule altogether.
Shareholders Resist "DExit" to Texas and Nevada
Texas and Nevada are actively positioning themselves as primary competitors to Delaware for U.S. corporate charters, capitalizing on the fallout from the Delaware Chancery Court’s decision to invalidate Elon Musk’s pay package, Tesla’s subsequent reincorporation to Texas, and the broader "anti-woke" movement targeting ESG and proxy advisors. Texas and Nevada have introduced corporate code provisions including a codified business judgment rule, statutorily defined controller duties, limits on books-and-records demands, specialized business courts, and the ability to adopt share ownership thresholds for submitting proposals or initiating derivative suits. These policies offer bright-line rules and circumscribed judicial oversight, contrasting with Delaware’s more flexible, discretionary, and case-law reliant approach.
A notable flurry of "DExit" proposals to Texas and Nevada has materialized, indicating that controllers and management teams are endorsing these jurisdictions’ corporate codes. According to ISS data for meetings held between January 2025 and May 2026, 33 Delaware corporations proposed redomiciling to Nevada (24) or Texas (9). Twelve of these companies were controlled entities (four affiliated with the Dolan family), which effectively guaranteed the approval of these redomiciliations. Proposals also passed at seven companies with significant founder or insider groups holding between 25% and 50% of beneficial ownership. In contrast, Delaware corporations with more dispersed shareholder bases frequently rejected redomiciliation attempts. Only six of fourteen "DExit" proposals to Texas or Nevada at non-controlled companies were approved during the same period, including one linked to a merger vote. The remaining eight failed or were withdrawn prior to the meeting, with ISS or Glass Lewis recommending against these proposals.
When proxy advisors recommend against "DExit" proposals, the fate of such votes often hinges on the decisions of Vanguard, BlackRock, and State Street. In 2025, the "Big Three" typically voted against moves to Nevada and did not endorse any moves to Texas. A material nexus between a company’s operations and its chosen jurisdiction appears to be the primary factor influencing their decisions. Vanguard, in its 2025 Annual Report, disclosed voting against redomiciliation proposals at three of the four Dolan group issuers "due to what we assessed to be insufficiently compelling rationale relative to the associated diminishment of shareholder rights." However, Vanguard supported the proposal at Sphere, citing a more compelling case for alignment between the company’s operational footprint and its state of incorporation.
Conclusion: Navigating the Fractured Proxy Landscape
The year 2026 has ushered in a reconfigured shareholder voting landscape, marked by fractured, less predictable, and more procedurally complex proxy voting dynamics. Issuers and proxy solicitors can no longer depend on historical patterns, benchmark policies, or the historical deference of passive funds to management to forecast voting outcomes. Instead, vote results are increasingly contingent on issuer-specific facts, the credibility of strategic rationales, the substance and timing of shareholder engagement, and the ability to anticipate the responses of fragmented voting constituencies under evolving regulatory and political pressures.
In this environment, early, data-driven preparation is paramount. Companies must possess a deep understanding of their shareholder base, including the allocation of voting authority within institutional investors, the shifting influence of proxy advisors across different investor constituencies, and the potential impact of retail or pass-through voting programs. Boards contemplating transformative actions, such as M&A transactions or jurisdictional shifts, must meticulously assess potential shareholder reactions through a lens that accounts for litigation risk, regulatory uncertainty, and increasingly bespoke voting behaviors.
The 2026 proxy season has underscored a significant paradox: efforts aimed at curbing the perceived excesses of shareholder and proxy advisory influence have not restored managerial certainty. Instead, they have inadvertently fostered a more volatile and less predictable voting environment, demanding a more sophisticated and adaptable approach to corporate governance.
