2026 Say-on-Pay Trends

Say-on-Pay outcomes in the 2026 proxy season have remained broadly favorable, continuing a multi-year trend of strong shareholder support and limited opposition. Fewer companies have experienced low support or failed votes, reflecting generally aligned pay and performance outcomes across much of the market. These results have been supported, in part, by strong equity market performance in 2025.

At the same time, investors and proxy advisors continue to scrutinize company-specific compensation decisions, with certain factors continuing to drive lower support levels. This has been particularly relevant over the past year, as compensation committees have navigated ongoing macroeconomic volatility and sought ways to reflect unexpected circumstances outside management’s control (such as the effects of tariffs) fairly within compensation program design and payout determinations.

Additionally, updated pay-for-performance methodologies from proxy advisors ISS and Glass Lewis that went into effect for the 2026 proxy season may begin to shape compensation design and evaluation frameworks. While the immediate impact has been relatively muted, these changes underscore a broader directional shift toward longer-term accountability.

Taken together, the 2026 proxy season highlights a familiar theme: strong headline results can mask increasing complexity beneath the surface, reinforcing the importance of thoughtful design, robust disclosure, and proactive shareholder engagement. This could increase further in upcoming proxy seasons, as the SEC’s recent proposal to permit scaled-back executive compensation disclosure for smaller issuers introduces additional complexity and will require ongoing monitoring and careful consideration by compensation committees (please see our recent client alert on this topic for additional details).

Strong Outcomes Reflect Favorable Market Conditions, but Scrutiny of Pay Decisions Persists

Average Say-on-Pay support levels have remained robust in 2026, with a lower incidence of failed proposals and fewer companies receiving low support outcomes relative to recent years. Early data suggest that approximately 80% of Russell 3000 companies received support levels of 90% or higher thus far (based on results from January through June 8, 2026), up from 75% during the first half of 2025.

This strength is attributable, in part, to favorable equity market conditions in 2025. Major stock indices including the S&P 500 and the Russell 3000 posted total returns exceeding 17% in 2025, with this positive momentum continuing through the first half of 2026. Improved stock price performance enhanced total shareholder return outcomes for many issuers, which in turn contributed to stronger alignment between pay and performance under investor and proxy advisor assessment frameworks. Notably, for many companies, this performance has been sufficient to offset increases in executive pay observed during the year in review.

However, strong outcomes do not signal a reduction in scrutiny. Investors and proxy advisors continue to focus closely on discrete compensation decisions, and companies receiving adverse recommendations from proxy advisors and lower levels of support thus far in 2026 generally had one or more of the following characteristics:

• Large one-time or “mega” equity awards or sign-on grants, particularly where the rationale or structure is not clearly articulated
• Perceived misalignment between pay outcomes and underlying company performance
• Limited or unconvincing responsiveness to prior Say-on-Pay results
• Compensation structures or decisions that deviate from market norms without sufficient disclosure or rationale (e.g., atypical or outsized severance arrangements, or adjustments made to in-flight performance-based equity awards)

Importantly, these factors can drive adverse outcomes even where overall pay levels appear reasonable. This dynamic reinforces the message that, while macro performance can support broadly favorable voting results, individual compensation decisions – and how they are communicated in proxy disclosure and engagement – remain critical determinants of shareholder support.

Macroeconomic Conditions and Tariff Uncertainty Are Driving Greater Use of Compensation Flexibility

Ongoing macroeconomic volatility and global trade uncertainty – particularly related to tariffs, supply chain disruptions, and cost inflation – have increasingly influenced compensation program design, operations, and payout determinations compared to the prior year.

Some companies are responding by incorporating greater flexibility into incentive plans to better align pay with performance, with several emerging practices gaining traction:

• Adjusting performance metrics to exclude the impact of external cost pressures (e.g., tariff-related expenses affecting profitability measures)
• Modifying goal-setting approaches, including a shift toward shorter-term (half-year, for example) or more flexible performance targets
• Applying discretion to adjust final payouts considering macroeconomic conditions or other factors beyond management’s control

These approaches reflect a pragmatic effort to align pay outcomes with underlying performance in a volatile environment. However, they also introduce increased complexity, subjectivity, and potential inconsistency into compensation programs. These changes can raise questions among investors and proxy advisors if not accompanied by clear, transparent disclosure – particularly if the company is at risk of being perceived as having a pay-for-performance disconnect. In this context, effective disclosure and investor communication are critical to maintaining credibility.

Pay-for-Performance Model Changes Are Influential but Not Yet Transformational

2026 marks the first proxy season in which recent quantitative pay-for-performance model updates from both ISS and Glass Lewis have been fully reflected in voting analyses, including the extension of evaluation periods from three to five years, alongside broader enhancements that place greater weight on longer-term alignment.

To date, these changes do not appear to have materially altered overall recommendation patterns. The influence of the updated methodologies may become more apparent over time, as ISS and Glass Lewis increasingly incorporate longer-term performance perspectives not only within their quantitative models, but also in their qualitative assessments of pay decisions and program design. Areas where these changes are most likely to have an impact include:

• Companies with significant one-time awards granted in prior years, which are now recaptured within a longer five-year evaluation window and may continue to influence alignment assessments
• Situations where recent performance recovery has obscured weaker longer-term performance trends, potentially leading to more negative evaluations under expanded time horizons

While the immediate impact has been relatively muted, these changes underscore a broader directional shift toward longer-term accountability. As a result, companies may face increased pressure to ensure that compensation outcomes are supportable not only on a short-term basis, but across a sustained performance horizon.

This dynamic also reflects a broader, multi-year shift in the governance landscape, as the influence of proxy advisors over Say-on-Pay voting outcomes has gradually declined with the continued expansion of proprietary stewardship frameworks among large institutional investors. However, even as companies may have greater flexibility to diverge from proxy advisor expectations, investors continue to closely scrutinize decisions related to executive pay, particularly those made outside established pay program parameters.

Executive Security Costs Are Becoming More Visible

This proxy season represents the first full cycle in which companies are disclosing compensation committee decisions made in response to shifting risk considerations following high-profile events involving executive security in late 2024. As a result, many companies have enhanced disclosure around executive protection programs, including residential security, personal protective services, and travel-related measures.

Investors and proxy advisors have generally demonstrated a pragmatic approach to these costs. Where companies clearly link security measures to identifiable risks, business continuity considerations, and oversight by the board or compensation committee, elevated expenses have been broadly accepted. However, scrutiny increases where benefits appear to extend beyond necessary risk mitigation into areas perceived as convenience or lifestyle oriented.

Recent guidance and investor perspectives reinforce this distinction:

• ISS has acknowledged the increasing prevalence and cost of security-related expenses in their latest policy updates
• Major institutional investors such as BlackRock Investment Services have emphasized the importance of understanding the rationale for executive perquisites and whether they are subject to regular review
• Selected investors such as Legal & General have taken a more stringent approach by voting against Say-on-Pay proposals at U.S. companies where executives use corporate jets for private purposes

As these practices and the related disclosures continue to evolve, the distinction between necessary security measures and perceived excess is likely to become an increasingly important area of focus. For boards, this reinforces the need to establish clear governance frameworks and provide transparent disclosure around both the rationale and oversight of these programs. It is also possible that an anticipated SEC proposal to overhaul executive compensation disclosure could include changes to the disclosure of these programs.