The Advisors' Blog

We’ve blogged about the waning influence of proxy advisors. This Semler Brossy memo, posted on the HLS Corporate Governance Forum, highlights that the decline has been happening for several years and, like most public company issues, isn’t black & white. Here are a few themes that are affecting the 2026 proxy season:

Three dynamics stand out. First, proxy advisors have experienced a meaningful, multi-year decline in their influence over Say on Pay voting, a trend that predates this proxy season and has accelerated as large asset managers have built out their own independent stewardship frameworks. Second, even as companies gain more room to diverge from proxy advisor recommendations, investors continue to exercise direct judgment on specific pay practices, particularly special awards to senior executives. Third, compensation committee chair elections remain a backstop mechanism for shareholder dissatisfaction, though one that is still rarely triggered in practice. Together, these dynamics point to a governance environment that is simultaneously less centralized and no less demanding.

When it comes to equity plan proposals, the negative overriding factor that ISS introduced on its equity plan analysis this year does not seem to be creating a huge hurdle for most companies. The Semler Brossy memo explains:

The most prominent illustration of the decline in proxy advisory influence is their limited influence on equity plan proposals. The percentage of plans that ISS recommended ‘Against’ has increased significantly over the past few years. However, the higher number of ‘Against’ recommendations has not carried over into the vote results; they have remained rather static. The absence of change despite a shift in ISS’s recommendations clearly demonstrates the limits of ISS’s influence, as the change in voting policy that drove the higher percentage of ‘Against’ recommendations did not meaningfully affect voting behavior.

For the 2026 proxy season, ISS introduced a new provision to its equity tests that allows an override to the Equity Plan Scorecard (EPSC) if there are few or no positive plan features. Plan features are a specific subcategory within the EPSC that relates to what is allowed by the plan. The plan contrasts cost and grant practices, focusing on size versus grant history. Positive plan features include the absence of liberal share recycling or broad discretionary vesting authority and the presence of a minimum vesting requirement. In the past, companies had been able to structure their plans to trigger ‘For’ recommendations even if they did not include any features that ISS considered beneficial, so long as they also did not trigger any overriding factors (liberal change-in-control definition, permit of share repricing, plan is excessively dilutive, plan contains an evergreen, etc.) and received sufficient points under the EPSC evaluation.

Despite these changes to ISS’s recommendation rate and methodology, the failure rate for equity proposals has remained consistently low over the past ten years. Two to three companies in the Russell 3000 fail in most years, with four or five failures being a notable year. Eight companies failed in 2023, but that proved to be a one-off event tied to a single industry, rather than a general trend (six of the eight failures were smaller pharmaceutical companies, which tend to have high dilution and plan costs due to the prevalence of options in that sector.) The most consistent feature of companies with a failed equity plan vote is excessive dilution. Companies that requested shares under an existing evergreen plan or a proposed plan that allows for share repricing were also common among recent plan failures.

As the memo points out, companies are experiencing stable voting outcomes compared to prior years – so at the moment, the proxy advisor and pass-through voting dynamics are causing subtle shifts rather than huge swings. Shareholder support may even be drifting upwards. Overall, that’s good news for companies – but that could also mean you’ll stick out like a sore thumb if you are one of the few companies getting a low vote.

– Liz Dunshee