The 2026 proxy season, at first glance, presented a familiar landscape. For companies within the Russell 3000 and S&P 500 indices, Say on Pay votes, director elections, and equity plan proposals continued to exhibit low overall failure rates, broadly mirroring recent historical outcomes. Proxy advisory firms and major institutional investors largely maintained consensus on compensation-related matters that warrant shareholder dissent. However, beneath this surface of continuity, a more intricate dynamic was unfolding, signaling a significant, albeit gradual, evolution in shareholder engagement and the diminishing singular influence of proxy advisory giants like ISS and Glass Lewis. This year’s season revealed a governance environment that is simultaneously less centralized and no less demanding of corporate accountability.
The Waning, Yet Evolving, Influence of Proxy Advisors
A key question shadowing the 2026 proxy season was the potential erosion of influence wielded by leading proxy advisory firms, ISS and Glass Lewis. This scrutiny intensified following increased regulatory oversight, including a December executive order directing federal agencies to review their practices, and subsequent guidance issued by the Department of Labor in April. Furthermore, 2026 marked the first proxy season where several prominent institutional investor groups publicly signaled a strategic "divorce" from the recommendations of these influential advisory bodies, choosing to develop and rely on their own independent stewardship frameworks.
Contrary to predictions of a dramatic decline, the analysis indicates a more protracted, multi-year trend of reduced proxy advisor sway. Defining "influence" as the difference in Say on Pay vote support between recommendations for and against a proposal, data reveals a consistent, meaningful decrease over the past five years. In 2021, this difference stood at a significant 27.7 percentage points (pp) for the Russell 3000 and 29.9 pp for the S&P 500. By the 2026 proxy season, this gap had narrowed to 19.8 pp and 22.6 pp, respectively, for the same indices.
This gradual decline in proxy advisor impact can be attributed to several interconnected factors. The regulatory environment, even with rescinded rules, signaled a willingness to challenge the established order, creating a ripple effect across the governance landscape. More significantly, however, this trend reflects a broader decentralization of stewardship responsibilities among large institutional investors. Asset managers, including major players like BlackRock, have increasingly granted their portfolio managers voting discretion and have concurrently invested heavily in building robust in-house governance policies and dedicated stewardship teams. As these internal frameworks mature and shareholder outreach strategies become more sophisticated, the singular voice of a proxy advisor may no longer hold the same weight. In some instances, in-house assessments now directly conflict with proxy advisor recommendations, allowing companies more latitude to deviate from advisory guidance without immediate repercussions for vote outcomes.
Equity Plan Proposals: A Case Study in Shifting Influence
The diminished impact of proxy advisors is perhaps most vividly illustrated in their increasingly limited influence over equity plan proposals. While ISS, in particular, has significantly increased its percentage of "Against" recommendations for these plans in recent years, this shift has not translated into a corresponding rise in proposal failures. Vote results for equity plans have remained remarkably static over the past decade, with failure rates consistently low, typically affecting only two to three companies within the Russell 3000 annually. A notable exception occurred in 2023, when eight companies experienced failed equity plan votes; however, this anomaly was largely industry-specific, with six of those failures concentrated among smaller pharmaceutical firms. These companies often exhibit higher dilution and plan costs due to the prevalence of stock options in their compensation structures.
The primary driver for failed equity plan votes remains excessive shareholder dilution. Companies requesting shares under existing evergreen plans or proposing plans that permit share repricing have also been frequently associated with recent failures. For the 2026 proxy season, ISS introduced a new element to its equity evaluation criteria: an override to the Equity Plan Scorecard (EPSC) if a plan demonstrates few or no positive features. These features, a subset of the EPSC, assess the permissibility of plan provisions. ISS’s approach contrasts cost and grant practices, weighing the size of proposed awards against historical grant data. Positive features include the absence of liberal share recycling policies, broad discretionary vesting authority, and the presence of minimum vesting requirements. Previously, companies could often structure plans to secure "For" recommendations by avoiding outright triggers for dissent (such as excessive dilution, evergreen provisions, or share repricing) and achieving sufficient points under the EPSC, even without explicitly beneficial features. The new override provision suggests ISS is attempting to recalibrate its methodology to better align with evolving investor expectations.
Special Awards: Direct Investor Scrutiny Beyond Proxy Advisors
The waning authority of proxy advisors does not signify a softening of investor scrutiny; rather, it highlights a shift towards more direct shareholder engagement on specific pay practices. Even as companies gain more latitude to diverge from proxy advisor guidance, investors continue to voice direct concerns when compensation practices appear poorly justified. Special awards for senior executives have emerged as a particularly potent example of this trend.
The proliferation of special awards—typically one-off grants outside of annual compensation structures—has become a significant focal point for both proxy advisors and a considerable segment of the investor community. Companies utilize these awards for various strategic purposes, including fostering urgency during periods of corporate transformation, incentivizing the achievement of ambitious "stretch" goals, or ensuring executive retention amidst competitive pressures or leadership transitions. While their overall prevalence has increased, their distribution remains uneven across industries. Data from the S&P 100 between 2021 and 2024, the most recent period with complete data, indicates that Financials, Industrials, Information Technology, and Healthcare sectors collectively accounted for approximately 67% of all one-time grants.
Proxy advisors typically review special awards with a critical eye, though they do not consistently issue "Against" recommendations solely based on their inclusion. Many awards are acknowledged with commentary but do not substantially impact voting outcomes. The size of an award, however, emerges as a critical determinant for an ISS "Against" recommendation. Smaller awards, while subject to criticism, are generally accepted by investors as a practical necessity in talent management. Larger awards, conversely, face considerably less tolerance, though their size alone does not automatically trigger a negative recommendation.
Analysis of awards reviewed by Semler Brossy indicates a clear correlation between award size and ISS recommendations. If a special award constituted less than half of an executive’s target compensation, ISS recommended "Against" approximately 25.8% of the time. This figure escalated dramatically once the award value exceeded three times the target annual compensation, with ISS recommending "Against" in 68.1% of such cases. It is important to note that many smaller awards did not represent the primary reason for a low Say on Pay vote. Instead, they were often secondary factors, overshadowed by broader issues such as a misalignment between pay and performance or disproportionately large awards granted to other executives. This context underscores that investors evaluate compensation holistically, with special awards scrutinized in relation to the overall pay package and prevailing corporate circumstances.
Director Elections: Accountability as a Backstop Mechanism
While the direct influence of proxy advisors has demonstrably waned, shareholders retain a critical oversight mechanism through director elections, albeit one that is rarely invoked to enact significant change. In the aftermath of a low Say on Pay vote, compensation committee chairs typically experience a marginal decrease in shareholder support. For instance, in the year following a low Say on Pay outcome, committee chairs saw their support drop by an average of 4.1 pp at companies where Say on Pay received 50-70% approval, and by 4.3 pp at those that failed the vote entirely. Despite these modest declines, the vast majority of directors retain strong shareholder backing. Across companies that failed Say on Pay, a significant 56% of compensation committee chairs still secured over 90% support in the subsequent year, with a mere 4% receiving less than 60% support. This data suggests that while accountability exists, its practical application remains selective and infrequent.
However, the proxy season has witnessed recent high-profile instances of low Say on Pay votes coinciding with significant dissent against compensation committee chairs. Several such cases were observed in 2026, signaling a potential shift in shareholder willingness to exercise their electoral power when executive compensation is perceived as significantly misaligned with their interests. These events highlight a growing shareholder impatience with pay practices deemed overly generous or poorly justified, even when proxy advisor recommendations may not be uniformly negative.
Implications and Concluding Thoughts
The overarching theme of the 2026 proxy season is one of continuity rather than disruption. The era of proxy advisors acting as the sole arbiters of shareholder sentiment has largely passed, with investors increasingly exercising independent judgment and employing their own governance assessment frameworks. Despite this shift in advisory influence, overall voting outcomes for Say on Pay, director elections, and equity plans have remained remarkably stable. Major deviations in director election results or equity proposal approvals appear unlikely in the immediate future.
Indeed, Say on Pay support has seen a subtle upward trend this season when compared to the preceding decade. This incremental improvement might lead to a reduction in the prevalence of "medium" outcomes, typically ranging between 70% and 90% support. Consequently, low Say on Pay votes—those falling below the 70% threshold—could carry greater significance, serving as more potent indicators of shareholder dissatisfaction. This trend toward outcome compression necessitates that companies meticulously monitor not only outright failures but also emerging areas of shareholder concern, which may signal a growing divergence between compensation strategies and shareholder expectations.
The diminished sway of proxy advisors does not translate into a more lenient governance climate. On the contrary, it suggests that compensation decisions must possess a more robust and clearly articulated business rationale, communicated with greater persuasive force. While investors may exhibit less uniform voting behavior, they continue to react decisively to pay actions that appear poorly justified or misaligned with corporate performance and broader shareholder interests. Special awards, in particular, are likely to remain a persistent area of contention due to their inherent controversy and the associated risks.
Looking ahead, the governance landscape may foster greater acceptance of creative compensation strategies, moving away from a homogenous set of investor expectations. However, this increased independence from proxy advisor mandates does not equate to a higher tolerance for compensation decisions lacking clear strategic grounding or compelling justification. Ultimately, corporate success in executive compensation will continue to hinge on decisions that are both strategically astute and effectively communicated to the shareholder base.
