2026 Proxy Season Trends: The Fracturing of Shareholder Power

Introduction

The 2026 proxy season confounded many of the assumptions that issuers, activists, and advisors have relied upon for more than a decade. While headlines suggest a retreat of shareholder activism and a rollback of ESG‑driven governance, the reality is more complex—and, in many respects, more destabilizing. Rather than a return to management dominance or a recalibration of investor priorities, the current environment reflects a fracturing of shareholder voting blocs.

For years, issuers and proxy solicitors could model vote outcomes with relative confidence around a handful of predictable centers of gravity: proxy advisor benchmark policies, the cohesive stewardship practices of the largest passive asset managers, and a stable framework for shareholder proposal adjudication. In 2026, those anchors are loosening. Legal challenges, regulatory intervention, political scrutiny, and market‑driven adaptation are simultaneously eroding the influence of proxy advisors, splintering passive investor voting blocs, and decentralizing stewardship decision‑making.

This article examines the most consequential developments of the 2026 proxy season and considers what this fractured landscape means for issuers navigating an increasingly unpredictable voting environment.

I. M&A Activism in the Spotlight

Activism is alive and well in 2026, notwithstanding appearances to the contrary. As of June 1, 2026, only one proxy contest went to a vote among companies with a market capitalization of $250 million or more. At Ingles Markets Incorporated, the dissident, Summer Road, LLC, successfully elected its sole nominee.

By contrast, six contests within the same period and market cap range settled, five of which the activist received at least one board seat. Three contests were withdrawn without any agreements or board seats and one activist’s nominations were deemed invalid.  In addition, Biglari Holdings waged a withhold campaign against two incumbent directors at Jack in the Box after previously withdrawing two director nominees. Biglari also sought to defeat certain management proposals. Shareholders sided with management, electing all of management’s nominees and approving all management-recommended proposals. There are currently six director proxy contests pending and a pending withhold campaign at Victoria’s Secret.

Activism beyond proxy contests, however, is thriving. According to Barclays in its Q1 2026 Review of Shareholder Activism, 41 activism campaigns at U.S. companies were announced in the period, a slight YOY increase and representing approximately 66% of all global campaigns. In contrast, activism dramatically decreased in Europe and the Asia-Pacific region during the same period.

Large, well-established activists no longer need to wage proxy fights or even nominate dissident directors to win board seats. Norwegian Cruise Line added five independent Board members after Elliott Management publicly demanded the company add new directors and implement a new business plan. Six Flags appointed a new Chair after JANA Partners publicly urged Six Flags to consider selling itself and appoint a new Chair. Public announcements are not even necessary for activists to pressure target boards. At Fortune Brands, Garden Investments privately nominated a director slate and demanded a new CEO succession plan. Soon after, the company backtracked on a previously announced CEO candidate and appointed a Garden employee to its Board.

Companies and activists alike increasingly prefer settlements. According to Barclays, activists won 41 of 45 board seats through settlements in Q1. This is in large part due to the increased uncertainty in predicting vote outcomes following the introduction of universal proxy cards, which offer shareholders the ability to choose candidates from both company and activist slates, and from recent changes at institutional investors and the proxy advisory firms highlighted in greater detail below.

M&A-related activism continues as a dominant trend in 2026, despite a slight reduction in Q1 due to market volatility. The M&A market is currently booming with $2.5 trillion dollars in deals in the first five months, up 39% YOY, according to Dealogic. This dramatic uptick will likely spur even more M&A-focused activism.

M&A activism takes many forms. A common activist demand for larger companies is to create pure-play structures, which may include breaking up the company, spinning off divisions, simplifying portfolio complexity, and evaluating strategic alternatives. Activist demands at smaller companies primarily focus on selling the company, including through an auction process. M&A activism also includes public opposition to announced deals.

Elliott Management continues to be a prolific M&A activist that usually seeks Board seats to advance its investment thesis. In 2025, Elliott waged a proxy fight at Phillips 66, calling on the company to separate or spin off its midstream energy transportation business, among other things. Elliott won two Board seats in 2025.  In 2026, Phillips 66 added two new Elliott-backed, but independent, directors, while two incumbent directors retired.

At J.M. Smucker, Elliott reached agreement this February to add two independent directors to the Board. The company also committed to stop pursuing M&A transactions and there are reports that it may divest its Hostess brand.

As noted above, Six Flags appointed a new Board Chair following JANA Partners’ call to explore selling the company and to appoint a new Chair. JANA is not the first ⁠activist to push Six Flags for changes. In 2025, the company agreed with Sachem Head, a then 5% holder, to add one of its principals to the Board.

M&A activists will also oppose transactions deemed unfavorable to shareholders. In 2025, Diligent reports that M&A transactions at over 30 public companies faced public opposition from investors, up from 19 in 2024. In January 2026, STARR Surgical failed to achieve the necessary shareholder support for its deal with Alcon AG after several postponements of the meeting. Broadwood Partners, a 27.5%, 30-year investor based its opposition on value and a flawed Board process. Broadwood also threatened to call a special meeting to remove three directors. In 2025, shareholders voted down Core Scientific’s proposed acquisition by CoreWeave. Two Seas Capital, a 6.2% holder, solicited against the deal, arguing the deal undervalued the company and that the company should pursue a standalone strategy.  TaskUs shareholders did not approve Blackstone and management’s proposed take-private after Think Investments and Murchison Ltd., which collectively held 25% of the company, announced their opposition to the deal.

Activists can also serve as catalysts in bidding wars. After Warner Brothers Discovery initially signed a deal with Netflix, Paramount Skydance announced a competing offer and threatened a proxy fight at Warner’s 2026 Annual Meeting. Netflix subsequently shifted to an all-cash offer and Ancora, a hedge fund activist, reportedly also considered a proxy fight at the Annual Meeting citing Warner’s failure to engage with Paramount. Paramount subsequently increased its offer and improved its terms, Warner announced that the enhanced offer could lead to a superior proposal, and Netflix withdrew from further bidding. Warner shareholders approved the Paramount transaction in April.

II. Regulatory and Market Headwinds Fracture Proxy Advisor and Passive Investor Voting Blocs, Altering the Landscape of Shareholder Influence

Perhaps the defining story of the 2026 proxy season is the fracturing of large, predictable, institutionally anchored voting blocs. Previously, public companies and their proxy solicitors could model vote outcomes with reasonable confidence by reference to three gravitational centers: investors influenced by Institutional Shareholder Services (“ISS”)’s benchmark policy; investors influenced by Glass Lewis’s benchmark policy; and the largely Board-deferential stewardship postures of the largest index funds. That calculus is becoming materially less reliable in 2026. Legal, regulatory, and market forces have eroded the influence of proxy advisors, splintered passive investor voting, and reshaped stewardship in ways that could make vote predictions more difficult (and hiring proxy solicitors even more crucial).

A. The Legal and Regulatory Assault on Proxy Advisors

The proxy advisory industry has faced increasing regulatory scrutiny in recent years, but the current environment represents a qualitatively different threat that strikes at the legal foundations of the proxy advisory business model itself. In July 2025, the U.S. Court of Appeals for the D.C. Circuit invalidated the SEC’s 2020 proxy advisor rules, holding 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, the decision opened the door to a potentially more consequential wave of federal and state-level action, premised on the theory that “foreign-owned” proxy advisors are influencing significant voting blocs with insufficient accountability or transparency.

In December 2025, Executive Order 14366 directed heightened scrutiny of the proxy advisor 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 weight given to non-financial factors — could give rise to liability under the anti-fraud provisions of the federal securities laws. 

The Executive Order also sought to require proxy advisors to register as investment advisers under the Investment Advisers Act of 1940, which would impose fiduciary, compliance, and disclosure obligations. (Glass Lewis announced it will voluntarily register with the SEC as an investment adviser. ISS is already registered as an investment adviser.)  Moreover, proposed interpretations of Sections 13(d) and 13(g) of the Exchange Act may require proxy advisors and their institutional investor subscribers to make beneficial ownership disclosures in circumstances where aggregated voting influence crosses statutory thresholds, a change that could fundamentally alter how institutional investors vote. 

Adding to the regulatory scrutiny is a growing antitrust focus on the proxy advisory industry. The Federal Trade Commission opened two separate investigations examining whether ISS’s and Glass Lewis’s “duopoly” harms competition. Additionally, the Department of Labor issued guidance under the Employee Retirement Income Security Act (“ERISA”) that threatens proxy advisors, and asset managers who rely on their recommendations, with fiduciary breaches if they consider DEI and ESG factors in their voting recommendations. The guidance reflects the Trump administration’s view that it is not appropriate for fiduciaries to rely upon non-financial considerations — including ESG criteria —when making voting decisions. If enacted, the 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.

States have also joined the regulatory frenzy. Florida sued ISS and Glass Lewis for allegedly violating deceptive and unfair trade practices statutes and asserted that their coordinated influence constitutes an unlawful restraint of trade. Texas Senate Bill 2337 would require proxy advisors to disclose if recommendations are based on non-financial factors, including ESG considerations. (ISS and Glass Lewis won a preliminary injunction against SB 2337’s enforcement, but litigation is ongoing. Egan-Jones, a third proxy advisor, already adheres to the statute’s requirements.) Texas also sued ISS and Glass Lewis for allegedly misleading investors, claiming the firms give priority to their own ESG agenda over the fiscal well-being of their subscribers. Indiana and Kansas similarly enacted statutes requiring proxy advisors to disclose, when recommending against management, whether such recommendation is based on factors beyond pure financial analysis. (ISS and Glass Lewis have sued to enjoin the law. Egan-Jones announced it will begin complying with these statues as of July 1, 2026.)  

Importantly, all these proposed laws deem ESG considerations as non-pecuniary, undermining the core tenet of proxy advisor and passive institutional orthodoxies—that good governance, which includes consideration of social and environmental factors material to an issuer’s business plan, bolsters long-term shareholder value. Indeed, given that some governance consideration underlies most of the proxy advisors’ voting policies, if enforced, this patchwork of state regulatory requirements could require state-specific disclosures on nearly every recommendation, presenting significant operational and financial challenges for the proxy advisory industry. 

At a federal level, Congress introduced three separate bills that, if enacted, could 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 their subscribers explicitly request otherwise and limit institutional investor “robovoting” (i.e., blindly following proxy advisor recommendations). Likewise, the “Stopping Proxy Advisor Racketeering Act” would prohibit proxy advisors from issuing voting recommendations for proposals if they provide consulting services to the issuer, provide engagement services to the relevant shareholder proponent or are part of a group that supports similar proposals, a wide net that could capture any organization promoting ESG initiatives.  Finally, the Senate’s “Corporate Governance Fairness Act” would require proxy advisors to register with the SEC and mandate targeted SEC examinations for conflicts of interest. Whether or not these bills advance, their introduction signals a hostile legislative environment for the industry, which may downgrade ISS and Glass Lewis from decision drivers to mere inputs, with substantially declining influence on investor voting. 

B. Splintering the Passive Investor Vote: Regulatory Pressure on Institutional Coordination, Vanguard’s Texas Settlement, and Stewardship Decentralization

The passive investor landscape is undergoing a parallel transformation. Revised SEC guidance on Sections 13(d) and (g) of the Exchange Act renewed scrutiny of whether large passive managers that engage issuers on subjects as to which they have voted against management (or could do so) are deemed to “influence the control of the issuer.” This interpretation, which could require large passive investors to file on Schedule13D, has chilled issuer-index fund engagement and could transform the governance-focused stewardship model at index funds.

Relatedly, informal proposals to compel “mirror voting” — requiring passive investors to vote their shares in proportion to the instructions of their underlying investors — continue to gain traction. Mirror voting would effectively disenfranchise stewardship teams and shift voting power to the underlying holders despite their modest participation in pass-through voting programs at such funds.

Vanguard’s $29.5 million settlement with Texas and ten other Republican-led states — arising from the application of climate-focused voting policies to its coal-related portfolio companies — is a prime example of index funds’ burgeoning legal exposure when their stewardship activities are perceived to prioritize ESG priorities over financial returns. While Vanguard’s settlement terms largely reflect industry norms[1], the settlement highlights how state attorneys general can deploy an arsenal of antitrust, consumer protection, and fiduciary laws against asset managers. 

Following regulatory and political pressure, the 2026 proxy season was the first where BlackRock, Vanguard, and State Street each operated with multiple internal stewardship teams. Each index fund has separated its stewardship team into two stewardship teams operating independently on policy, voting, and engagement, thereby splitting their votable shares among each stewardship team based on firm-specific criteria (where each team is less likely to control more than 5% of an issuer’s outstanding shares). While each stewardship team will engage with issuers separately and have potentially different objectives, Innisfree’s experience is that both teams often vote in parallel. However, as the separate stewardship teams develop their own voting policies over time, the historically monolithic, management-friendly passive fund voting bloc may splinter. Vote outcomes will be influenced by multiple stewardship teams with increasingly divergent voting policies, which may not necessarily favor management.

C. Proxy Advisors and Institutional Investors Move Away from Benchmark Reliance

The market is adapting to the regulatory and political pressure on proxy advisors in ways that may prove durable. Two large asset managers — JPMorgan and Wells Fargo — announced they will no longer rely on external proxy advisor recommendations and instead use proprietary internal voting systems. JPMorgan developed an AI-driven platform to power its proxy voting function, while Wells Fargo customized its voting infrastructure using Broadridge’s systems. 

ISS and Glass Lewis are also adapting. ISS introduced Gov360, a research and analytics product that delivers substantive governance analysis without attaching a specific vote recommendation. ISS also introduced Custom Lens, a customizable platform that allows clients to tailor underlying data, analytical frameworks, and recommendations to their own policy preferences. More radically, Glass Lewis announced it will phase out its benchmark policy entirely in 2027, transitioning clients to custom or thematic policies and offering four discrete policy perspectives[2] within a single integrated report. These changes portend the decline of the one-size-fits-all benchmark recommendation, which historically anchored proxy advisors’ outsized influence on vote outcomes.

III. The Rise of Retail Voting Power?

While proxy advisors and large passive managers have historically dominated the shareholder voting calculus, retail holders — who tend to vote with management, if they vote at all — could provide a meaningful source of support for some issuers.  Exxon’s retail voting program is a prominent example of an issuer mobilizing its retail constituency on an ongoing basis. Under Exxon’s program, retail holders can opt-in to vote with management on proposals at future annual meetings, effectively providing management with a perpetual proxy that aligns their participation with the Board’s recommendations without requiring active participation at each meeting. Participating retail holders can either apply their standing voting instruction to all matters or all matters other than contested director elections and M&A transactions. Issuers must still provide participants with proxy materials and participants may vote contrary to their standing instructions at any time.

The structural logic is straightforward: if companies with large, stable retail holdings (including employees and retired employees) can catalyze retail participation, the resulting votes create a durable bulwark to the influence of proxy advisor-directed institutional votes and activist campaigns. However, issuers have been hesitant to adopt similar retail voting programs. To date, only one other public company (BigBear.ai) currently offers the program. 

The expansion of pass-through voting programs by Vanguard and other large index funds operates as the other side of this coin. As more beneficial owners of index fund shares participate in these programs, the aggregate vote controlled by the fund’s stewardship team(s) should diminish — and the composition of that retail vote, if it favors management, could materially shift outcomes on contentious proposals. However, in Innisfree’s experience, pass-through voting has not meaningfully impacted stewardship voting at Vanguard, BlackRock, or State Street. While the funds offer pass-through voting to an increasing number of their investors, most investors either do not opt-in or opt-in to the stewardship team’s vote. The question remains whether issuers and index funds will scale up their respective retail campaigns such that they have a transformative—rather than incremental—impact on voting results.

IV. Shareholders Object to the SEC’s No-Objection Policy

On November 17, 2025, the SEC revised the no-action letter framework governing the shareholder proposal exclusion process. For the 2025-26 proxy season, except for exclusions based on state law, the SEC will not adjudicate the merits of exclusion requests. Instead, if the issuer has a reasonable basis to exclude the proposal under Rule 14a-8,then the SEC will not object to that decision, signaling a shift in policy from substantive review to issuer deference. 

Yet shareholder proposal exclusions are lower in 2026 than 2025. This is the surprising conclusion of a recent ISS study of shareholder proposals at Russell 3000 meetings between January 1 and May 15. According to ISS, in 2026, 76% of shareholder 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 striving to “make IPOs great again” and reduce issuer compliance burdens. Instead, the no-objection policy has made the shareholder proposal process more difficult for issuers, who must now confront an environment marked by increased litigation risk, reputational attacks, and more hostile forms of shareholder activism.

Shareholders have unleashed 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 sued to invalidate the policy, arguing it violated the Administrative Procedure Act. Shareholder proponents have also sued issuers to enjoin them from excluding their proposals. In one case, a federal court ordered BJ’s Wholesale Club to include the New York State Comptroller’s deforestation proposal in their proxy statement. Other issuers, including AT&T and Axon Enterprise, have settled similar litigation and agreed to include proposals in their proxy statements. 

Proponents have also threatened 14a-4 “no slate” solicitations to force issuers to include their proposals in proxy statements. Earlier this year, Trillium Asset Management announced that BJ’s Wholesale agreed to include Trillium’s proposal calling for a report on greenhouse gases. The announcement came after BJ’s Wholesale received a no-objection letter on the same proposal, after which Trillium threatened to launch a 14a-4 campaign to solicit votes for the GHG proposal and additional governance proposals. In its press release, Trillium noted that “[w]hen 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.” The Communications Works of America announced their intent to launch a 14a-4 campaign for five governance-related proposals at Nextstar Media Group, but did not pursue that campaign

Issuers also face increased proxy advisor scrutiny. Glass Lewis’s Benchmark Policy currently[3] states that “shareholders should be afforded the opportunity to vote on matters of material importance.”  While their Benchmark Policy does not threaten a negative recommendation for excluding shareholder proposals, the policy 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 did not include a similar update to its Benchmark Policy but, according to The Deal, 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 rationale to exclude the proposal. 

While issuers have long denigrated the previous no-action letter process, it created a (theoretically) neutral forum where issuers and proponents respected the Staff’s determinations as final and binding. The risk of further litigation, while possible, rarely materialized. In the no-objection era, litigation, reputational damage, and the ire of proxy advisors and shareholders now complicate the decision whether to exclude a shareholder proposal. These risks, compounded by the specter of activism arising from other circumstances, could explain why issuers are deciding that shareholder proposal fights are not worth the trouble. The SEC must now decide whether to reinstate the prior no-action letter process, materially amend the shareholder proposal rule, or withdraw the rule altogether.

V. Shareholders Resist “DExit” to Texas and Nevada

Texas and Nevada are positioning themselves as the 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 rise of the “anti-woke” movement against ESG and proxy advisors. 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 to submit proposals or bring derivative suits are just some of the features Texas and/or Nevada have included in their corporate codes. These are policies comprised of bright-line rules and circumscribed judicial oversight, in contrast to Delaware’s more flexible, discretionary, case-law reliant approach. 

A flurry of “DExit” proposals to Texas and Nevada have recently materialized, indicating that controllers and management teams are endorsing the Texas and Nevada corporate codes. According to ISS data, for meetings held from January 2025 to May 2026, 33 Delaware corporations proposed redomiciling to Nevada (24) or Texas (9). 12 of these companies were controlled (four are affiliated with the Dolan family), guaranteeing the redomiciliations would pass. Proposals also passed at seven companies with a large founder or insider group with collective beneficial holdings between 25% and 50%. In contrast, Delaware corporations with more widely dispersed shareholders frequently rejected redomiciling to Nevada or Texas. Only six of fourteen DExit proposals to Texas or Nevada at non-controlled companies were approved during the same period (including one in connection with a merger vote). The remaining eight failed or were withdrawn from consideration before the meeting. ISS or Glass Lewis recommended against DExit in each of the eight proposals that failed. 

When the proxy advisors recommend against DExit, its fate is often determined by Vanguard, BlackRock, and State Street. In 2025, the Big Three typically voted against moves to Nevada and none endorsed a move to Texas. The primary factor that appears to sway the Big Three is if there is a material nexus between the company’s operations and the jurisdiction of choice. In its 2025 Annual Report, Vanguard disclosed it voted 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 voted for the proposal at Sphere because “Sphere presented a more compelling case for alignment between the company’s operational footprint and its state of incorporation.”

Source: Diligent, Public Disclosures

While not a DExit vote, ExxonMobil’s recent successful redomiciliation from New Jersey to Texas reinforces the importance of the operational nexus to the outcome of these votes. In its proxy statement, ExxonMobil cited that “most senior corporate executives and all corporate functions [are] based in [Texas] for the last 35 years. . . Approximately 30% of our global employees are based in Texas . . . Our U.S.-based research facilities are in Texas; the vast majority of our U.S.-facing non-profit giving is focused on Texas communities and the primary focus of our professional-level employee recruiting is directed toward Texas’ leading undergraduate and graduate institutions.”

While management may increasingly prefer Nevada or Texas corporate law, and we may begin to see an uptick in IPOs of Nevada and Texas corporations (e.g., SpaceX), the decision to reincorporate rests with the shareholders. Absent a compelling justification, shareholders will vigilantly defend their rights and thwart management from absconding with the corporate machinery to more management-friendly jurisdictions.

Conclusion

In 2026, the reconfigured shareholder voting blocs described above have created a fractured, less predictable, and more procedurally complex proxy voting environment. Issuers and proxy solicitors can no longer rely on historical patterns, benchmark policies, or passive fund deference to management to predict voting results. Instead, vote outcomes increasingly turn on issuer specific facts, the credibility of strategic rationales, the sequencing and substance of shareholder engagement, and the ability to anticipate how fractured voting constituencies will respond under evolving regulatory and political pressures.

In this setting, early, data driven preparation becomes critical. Companies must understand not only who their shareholders are, but how voting authority is allocated within institutional investors, how proxy advisor influence is changing across investor constituencies, and where retail or pass through voting programs are likely to be influential versus illusory. Boards considering transformative actions—whether M&A transactions or jurisdictional shifts—must assess shareholder reaction through a lens that accounts for litigation risk, regulatory uncertainty, and increasingly bespoke voting behavior.

The 2026 proxy season underscores a paradox: efforts to curb perceived excesses of shareholder and proxy advisory influence have not restored managerial certainty, but instead have produced a more volatile, less predictable voting environment.

1Vanguard agreed to not pressure issuers to take specific actions (including reducing carbon emissions), expand its pass-through voting program, and avoid participating in climate-focused investor groups with coordinated stewardship initiatives.(go back)

2Of the four policy perspectives, Glass Lewis announced that one will be sustainability-focused centering on environmental, social and long-term ESG risks; one will be financially focused, tailored for active managers; one will be focused on governance fundamentals, tailored for stewardship teams (and generally resembling the current benchmark policy); and one will be management-aligned.(go back)

3As described supra, Glass Lewis announced it will no longer offer a single benchmark policy starting in 2027(go back)