2026 Proxy Season: Trends in Investor Behavior & Noteworthy Developments

This post is the second part of D.F. King’s 2026 Proxy Season debriefing report. See here the first part on Shareholder Proposals and here for the second part on Trending Proposal Topics.

In May 2026, the SEC proposed sweeping changes to the public company reporting framework that, if adopted, would significantly reduce disclosure and compliance obligations for a substantial portion of U.S. public companies. The proposal would simplify the current filer-status structure, increase the threshold for large accelerated filer status from $700 million to $2 billion of public float, and provide a broader group of companies with access to disclosure accommodations currently available only to smaller reporting companies and emerging growth companies. SEC Chair Paul Atkins stated that the objective of the proposal is to encourage companies to access and remain in the public markets by reducing regulatory burdens and creating greater certainty regarding reporting obligations.

If adopted as proposed, the changes would have meaningful implications for corporate governance and executive compensation disclosure. Many companies that currently qualify as accelerated filers would become non-accelerated filers and would no longer be required to obtain an auditor attestation of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. In addition, a significantly larger population of companies could become eligible for scaled executive compensation disclosures and relief from certain governance-related requirements. According to the SEC, approximately 81% of reporting companies would qualify for some form of scaled disclosure accommodation under the proposed framework, compared to roughly 52% today.

The proposal has generated considerable debate among governance stakeholders. Supporters argue that the existing reporting framework imposes disproportionate costs on smaller and mid-sized companies and may discourage private companies from pursuing public listings. Critics, including several investor advocacy organizations, have expressed concerns that reducing disclosure obligations and internal controls oversight could limit transparency and weaken investor protections. As a result, the proposal has emerged as one of the most consequential governance-related rulemakings of 2026 and may ultimately reshape the disclosure landscape for a large segment of public companies.

Looking ahead, whether the proposal is ultimately adopted in its current form remains uncertain. Nevertheless, its release signals a broader regulatory shift towards reducing compliance burdens and reassessing the balance between public company obligations and investor protections. For issuers, investors and governance professionals alike, the proposal serves as a reminder that debates over corporate transparency, executive accountability and capital formation are likely to remain prominent themes in the years ahead.

Results From the SEC’s Updated No-Action Process for the 2026 Proxy Season

For the 2026 proxy season, the SEC fundamentally altered the practical operation of the Rule 14a-8 no-action process. In November 2025, the Division of Corporation Finance announced that, for the 2025–2026 proxy season, it generally would no longer provide substantive responses to shareholder proposal exclusion requests, except for those submitted under Rule 14a-8(i)(1), which relates to proposals that are not a proper subject for shareholder action under applicable state law. Companies seeking to exclude proposals must still comply with Rule 14a-8(j) by notifying the SEC and the proponent of their intent to omit a proposal, but the staff’s historical role as an arbiter of most exclusion disputes has been significantly reduced. Instead, companies may receive a procedural “no objection” response if they represent that they have a reasonable basis for exclusion grounded in Rule 14a-8, prior staff guidance, or judicial precedent, but the staff will generally no longer express a substantive view on the merits of the exclusion. A

s a result, the no-action process became less of a planning backstop and more of a risk-allocation exercise. Without substantive SEC guidance available in most cases, boards and management teams were required to make exclusion decisions with greater reliance on outside counsel, precedent, and their own risk tolerance. While many expected the streamlined process to result in more exclusions, the practical effect was more nuanced. Some issuers became more willing to exclude proposals where the legal basis was well-established, particularly following the more company specific framework adopted in SLB 14M. At the same time, other companies chose to include proposals that previously might have been challenged through the no-action process, avoiding potential litigation and reputational risk associated with unilateral exclusion. Ultimately, we saw a reduced reliance on the no-action process; in the first half of 2026, companies had submitted approximately 170 Rule 14a-8(j) exclusion notices, compared to approximately 335 no-action requests during the comparable period of the prior season.

In light of these changes, proponents have evolved their approach as well, incorporating the following strategies for maintaining influence on the ballot:

• Public campaigns targeting companies that excluded proposals
• Initiating litigation to challenge proposal exclusion decisions made by companies
• Launching withhold campaigns targeting directors re. E&S concerns

As the SEC stepped back from acting as the primary referee in many proposal disputes, investors, proponents, courts and proxy advisors assumed a comparatively larger role in determining outcomes. The result was a proxy season in which understanding investor sentiment and likely voting behavior became an even more critical component of managing the shareholder proposal process.

Mounting Regulatory Pressure on Proxy Advisory Firms

Regulatory pressure on proxy advisory firms intensified considerably during 2025 and remained a key theme throughout 2026. What began as a debate over the influence of ISS and Glass Lewis evolved into a broader effort involving Congress, federal agencies, state attorneys general, and the courts. The focus expanded beyond traditional SEC oversight to include antitrust concerns, transparency, conflicts of interest, fiduciary duty, and the role of ESG and DEI considerations in voting recommendations.

Several developments dating back to 2025 accelerated this trend. State attorneys general in Florida, Missouri, and Texas launched investigations into ISS and Glass Lewis, while Florida later brought an enforcement action alleging consumer protection and antitrust related concerns. In parallel, Senator Bill Hagerty (R-Tenn.) called on the DOJ and FTC to investigate the proxy advisory industry, and the D.C. Circuit’s decision in ISS v. SEC limited the SEC’s ability to regulate proxy voting advice through the federal proxy solicitation framework. Regulatory pressure increased further in December 2025 when President Trump issued Executive Order 14366 directing the SEC, FTC, and Department of Labor to review proxy advisor regulation, transparency, conflicts of interest, and the influence of ESG- and DEI-related voting policies.

In 2026, attention shifted toward implementation and enforcement. State-level investigations and litigation continued, including multi-state actions against ISS, while the Department of Labor issued guidance addressing circumstances under which proxy advisors could be treated as ERISA fiduciaries. Although no sweeping new federal regulations had been adopted as of mid-2026, proxy advisory firms remain subject to heightened scrutiny from multiple regulatory fronts.

Amid these regulatory developments, we saw a handful of institutional investors seemingly cut ties with proxy advisory firms – in January, both JP Morgan and Wells Fargo announced their decision to step back from proxy advisory firm usage and instead rely on internal AI-powered proxy voting platforms.

Proxy advisory firms also announced several notable policy and business model changes. ISS eliminated the use of board diversity as a factor in U.S. director election recommendations and moved to a case-by-case approach to environmental and social shareholder proposals, while Glass Lewis announced that it would move away from its longstanding benchmark voting policy framework and transition toward more customized voting and stewardship solutions. While the long-term regulatory outcome remains uncertain, the heightened focus on proxy advisory firms has firmly established the topic as a key area of debate within the evolving corporate governance landscape.

The Evolution (and Splintering) of Stewardship and Engagement

The 2026 proxy season further highlighted the evolution of institutional investor stewardship and engagement practices. Amid increased regulatory, political and public scrutiny of stewardship activities, many institutional investors appeared to adopt a more measured approach to engagement, with market participants reporting less prescriptive feedback and a greater emphasis on listening and information gathering. Investors increasingly framed governance and voting decisions through the lens of long-term shareholder value and economic materiality, while reiterating that responsibility for corporate strategy ultimately rests with company management and boards.

These broader shifts were accompanied by notable structural changes at some of the world’s largest asset managers. BlackRock, Vanguard and State Street each announced reorganizations that separated stewardship and engagement functions from certain voting and investment governance responsibilities, reflecting an increased emphasis on delineating the various roles that institutional investors play in the corporate governance process. While each firm’s approach differed, the changes collectively underscored a move away from a highly centralized stewardship model and towards more specialized governance structures.

Several asset managers are also expanding custom and pass-through voting options, whereby eligible shareholders can choose from a growing selection of voting policies to apply to their shareholdings. Splintering can also be found between U.S. and European investor approach; we are seeing European investors reinforcing social and sustainability interests reflected in their voting policies, whereas in the U.S., anti-ESG executive orders have led to a perceived ‘retreat’ from ESG for many institutional investors.

Alongside the aforementioned changes at major asset managers and evolving practices among proxy advisory firms, companies encountered a less predictable voting environment in which historical voting patterns and broad governance frameworks were at times less reliable indicators of outcomes. As stewardship programs continue to evolve, companies may need to place greater emphasis on direct shareholder engagement, company specific messaging and clearly articulating how governance decisions support long term value creation.

This trend is likely to remain an important feature of the governance landscape as institutional investors balance stewardship responsibilities against evolving regulatory expectations, political scrutiny and increasingly diverse client preferences.

Governance Takes Center Stage

The 2026 proxy season saw a renewed focus on traditional governance topics as governance proposals accounted for an increasing share of overall shareholder proposal activity. While environmental and social issues remain an important component of investor stewardship programs, a growing proportion of shareholder proposals centered on longstanding governance topics such as independent board chairs, special meeting rights, written consent and the elimination of supermajority voting requirements. Governance proposals also represented the bulk of the proposals receiving majority shareholder support during the season. We believe this trend reflects a broader emphasis on corporate governance mechanisms that investors view as directly tied to board accountability, shareholder rights and long term value creation.

Importantly, the growing prominence of governance proposals should not be interpreted as a corresponding decline in investor interest in environmental and social issues. Although environmental and social proposals represented a smaller share of overall proposal activity, support levels generally remained stable compared to recent years.

Looking ahead, traditional governance topics are likely to remain an important focus of shareholder engagement and voting activity. Even as topical issues such as artificial intelligence, cybersecurity and human capital management continue to evolve, investors remain focused on how boards oversee these risks and whether existing governance frameworks appropriately protect shareholder interests.

The Growing Focus on Retail Shareholder Participation

The 2026 proxy season highlighted a growing focus on retail shareholder participation and the potential influence of historically under-voted shares. While institutional investors continue to hold a significant portion of shares at most public companies, retail shareholders collectively represent an important voting constituency whose participation rates have traditionally lagged behind those of institutional investors. As companies continue to seek new ways to engage shareholders and improve vote turnout, retail investors have received increased attention as a potentially meaningful source of voting support.

One of the most notable retail engagement developments was ExxonMobil’s voluntary retail voting program, which was first announced in 2025. The program allows retail shareholders to establish standing voting instructions authorizing the company to vote their shares in accordance with board recommendations, while preserving the shareholder’s ability to override those instructions or opt out at any time. The program attracted significant attention because it created a potential model for companies seeking to increase participation among historically under-voted retail shareholders. ExxonMobil stated that approximately 75% of shares held by retail investors were not voted at its 2025 annual meeting despite retail shareholders owning a substantial portion of the company’s outstanding shares, highlighting the scale of the untapped retail voting bloc.

While it remains too early to determine whether similar programs will materially impact voting outcomes, the initiative reflects a broader recognition that retail shareholders have been a historically untapped resource. Initial interest in the concept extended beyond ExxonMobil, with Broadridge indicating at the beginning of the year that it was in discussions with a range of issuers regarding similar programs as the initiative remained in its pilot phase.

At the same time, companies have increasingly expanded their use of targeted digital outreach efforts, including email, text message and other direct-to-shareholder communication campaigns, to improve retail participation rates and encourage voting among individual investors. As companies continue to explore new methods of shareholder outreach, digital engagement and voting accessibility, efforts to increase retail participation may become a more prominent feature of future proxy seasons.

For issuers, the key takeaway is that for many companies retail shareholder participation is increasingly becoming a strategic component of proxy season planning. Companies that successfully communicate with and mobilize retail investors may be better positioned to improve vote turnout, build support for management proposals and strengthen overall shareholder engagement efforts.

Overboarding

The chart below details the maximum number of public company boards a director can serve on before they are considered “overboarded” at several of the larger institutional investors and advisory firms:

The complete report, including its Appendix, is available here.