The 2026 proxy season has underscored the enduring influence of Institutional Shareholder Services (ISS) on corporate voting outcomes, even in the face of significant regulatory pressures and the burgeoning adoption of artificial intelligence (AI) in proxy voting systems. Data from the period reveals that when ISS recommends against management proposals, investor opposition frequently matches or even surpasses prior levels, particularly in categories where ISS issued fewer adverse recommendations overall. This trend suggests that companies must remain acutely attuned to ISS policies and potential recommendations as they navigate fall investor engagements and prepare for the upcoming 2027 proxy season.
The landscape for ISS has been particularly dynamic in recent months. President Trump’s December 2025 Executive Order, which targeted core elements of the proxy advisory firm’s business model, alongside a series of lawsuits initiated by state attorneys general and the strategic deployment of AI-powered proxy voting tools by major financial institutions like J.P. Morgan and Wells Fargo, had raised substantial questions about whether ISS’s long-established sway over vote results was beginning to diminish.
To investigate this evolving influence, Teneo analysts meticulously reviewed S&P 500 annual meetings conducted between January 1 and June 30, 2026. The study focused on comparing vote outcomes for proposals that received an ISS recommendation against management’s stance with those where ISS recommendations were aligned with management. The underlying hypothesis posited that a decline in ISS influence would correlate with a reduced year-over-year difference in average vote results between proposals that ISS supported versus those it opposed.
However, the empirical data presented a different narrative. In numerous proposal categories, the divergence in average vote support between proposals receiving positive recommendations and those facing adverse recommendations actually widened when compared to the 2025 proxy season. This analysis yielded two pivotal findings that warrant close attention from corporate leadership and governance professionals alike.
ISS Recommendations Gain Traction Where Adverse Votes Are Infrequent
A significant observation from the 2026 proxy season was that in instances where ISS issued fewer adverse recommendations, those specific recommendations were associated with a more substantial difference in vote support compared to previous years. This suggests a heightened impact of ISS’s opinion when it deviates from management’s preferred outcome, especially in situations where such opposition is relatively rare.
Say-on-Pay Proposals
While specific quantitative data points were not provided in the original analysis for "Say-on-Pay" proposals in this category, the overarching finding implies that any adverse ISS recommendation on executive compensation packages carried considerable weight with institutional investors. Historically, "Say-on-Pay" votes have been a focal point for shareholder activism, and a negative ISS recommendation often serves as a catalyst for increased dissent. The 2026 data suggests this dynamic remained potent, particularly when ISS’s opposition was an outlier event for a particular company or across the broader market in this specific proposal type. This indicates that the rationale behind ISS’s adverse recommendation on pay likely resonated strongly with investors, potentially due to concerns about excessive compensation, misalignment with performance metrics, or inadequate disclosure.
Environmental and Social Shareholder Proposals
Similarly, for Environmental and Social (E&S) shareholder proposals, the trend of increased vote differentials where ISS issued infrequent adverse recommendations was noted. E&S issues have progressively gained prominence on the corporate governance agenda, with investors increasingly scrutinizing companies’ performance and disclosure on matters ranging from climate change and carbon emissions to diversity, equity, and inclusion (DEI) and human capital management. When ISS recommends against management on these types of proposals, it often signals a perceived gap between corporate practices and evolving investor expectations. The amplified vote divergence in 2026 suggests that ISS’s alignment with these proposals, or its opposition to management’s stance, served as a powerful signal to investors who might otherwise have been less engaged on specific E&S matters. This could reflect a growing consensus among institutional investors that ISS is accurately identifying critical E&S risks or opportunities that management may be overlooking or inadequately addressing. The heightened opposition levels in these instances likely correlate with increased investor focus on ESG (Environmental, Social, and Governance) integration into investment strategies.
Governance Proposals See Narrower Vote Differentials Amid Increased ISS Opposition
In contrast to the aforementioned categories, the analysis identified a different trend for governance shareholder proposals and uncontested director elections.
Governance Shareholder Proposals
The data indicated a slight decrease in the difference in vote support for governance proposals when ISS recommendations were adverse compared to when they were aligned with management. Specifically, the average vote difference for governance proposals where ISS opposed management fell from 13.3 percentage points to 12.6 percentage points in 2026. Concurrently, the rate at which ISS recommended against uncontested director nominees saw a marginal increase, rising from 2.5% to 3% of all nominees. This suggests a more nuanced dynamic at play within governance matters.
The narrowing of the vote differential, despite a slight uptick in adverse recommendations, could be attributed to several factors. Firstly, it might indicate that while ISS’s opposition on governance issues remains significant, a larger proportion of institutional investors are independently evaluating these proposals and perhaps finding reasons to support management despite ISS’s stance. This could be driven by differing interpretations of governance best practices, the specific context of a company’s situation, or a desire by some investors to maintain a more collaborative relationship with management on governance matters.
Secondly, the increased rate of adverse recommendations from ISS on director nominees might be a signal of ISS applying a more stringent or consistent standard across a broader range of companies. However, the impact of these recommendations on vote outcomes appears to be less dramatic than in E&S or say-on-pay categories when ISS’s opposition is less frequent. This could mean that governance concerns, while important, might require a more substantial or broadly shared investor consensus to significantly sway voting outcomes, especially in uncontested elections where director retention is often the default outcome.
Uncontested Director Elections
The trend observed in governance proposals also extended to uncontested director elections. The difference in average vote support between directors ISS opposed and those it supported saw a slight contraction, moving from 13.3 percentage points in 2025 to 12.6 percentage points in 2026. This marginal narrowing, coupled with a slight increase in the percentage of uncontested director nominees receiving adverse ISS recommendations (from 2.5% to 3%), reinforces the idea that ISS’s influence, while present, may face greater headwinds in categories where management typically enjoys strong shareholder support by default.
The slight reduction in the vote differential could suggest that a higher percentage of investors are either not swayed by ISS’s recommendations on directors or are actively choosing to vote in favor of management’s slate despite ISS’s opposition. This might be particularly true for directors with strong track records or those perceived as crucial to the company’s strategic direction. The marginal increase in the rate of adverse recommendations, however, could signal ISS’s continued vigilance in identifying potential governance shortcomings, even if the ultimate impact on vote outcomes is becoming slightly less pronounced in these specific instances. It is important to note that even a small percentage of opposed directors can represent a significant number of individuals, and sustained opposition from a major proxy advisor like ISS can put pressure on boards to address the underlying concerns.
Broader Context and Implications for Corporate Strategy
The findings from the 2026 proxy season arrive at a critical juncture for corporate governance. The regulatory environment, shaped by executive orders and potential legislative actions, continues to be a significant factor influencing how proxy advisory firms operate and how their recommendations are perceived. Simultaneously, the rapid integration of AI into financial markets, including proxy voting, presents both opportunities for enhanced analysis and potential challenges related to algorithmic bias or unforeseen impacts on voting behavior.
The resilience of ISS’s influence, particularly on E&S and say-on-pay proposals where its adverse recommendations correlated with higher shareholder opposition, highlights the firm’s role as a key opinion leader in the governance space. As institutional investors increasingly integrate ESG factors into their decision-making, ISS’s analysis on these matters likely carries significant weight, acting as a crucial data point in their evaluation processes. The alignment of ISS’s views with prevailing investor sentiments on E&S issues, for instance, makes its recommendations harder for companies to dismiss, potentially forcing boards to be more proactive in addressing these concerns.
The nuanced performance of ISS recommendations on governance and director elections suggests that while ISS remains a powerful voice, its influence is not monolithic. Investors are demonstrating a capacity for independent assessment, particularly in areas where director tenure or established company practices are perceived positively. However, the continued slight increase in adverse recommendations on director nominees signals that ISS is maintaining its oversight role, potentially flagging issues that, while not immediately translating into widespread shareholder rejection, could accumulate over time and necessitate board-level attention.
For companies, the implications are clear: a proactive and nuanced approach to investor engagement is paramount. Understanding the specific drivers behind ISS recommendations, particularly in categories where their impact is amplified, is crucial for developing effective engagement strategies. This includes not only responding to ISS’s specific points of contention but also anticipating future governance trends and investor priorities. The ability to articulate a compelling narrative around compensation, E&S performance, and board effectiveness, supported by robust data and transparent disclosures, will be critical for navigating the proxy season successfully.
As the market continues to grapple with the implications of AI in financial decision-making, it will be essential to monitor how these technologies interact with the established influence of proxy advisory firms. The 2026 proxy season has provided a valuable snapshot, demonstrating that while the governance landscape is evolving, the insights and recommendations provided by firms like ISS continue to be a significant factor in shaping shareholder votes, demanding ongoing strategic attention from corporate boards and management teams. The path forward requires a deep understanding of both ISS policies and the broader shifts in investor expectations, particularly concerning sustainability and robust corporate governance.
