Vinson & Elkins on Shareholder Engagement in 2026: Vigilance Amid Uncertainty

A Stewardship Overhaul

For decades, the world’s largest institutional investors — BlackRock, Vanguard, and State Street — relied on centralized stewardship teams, applying uniform voting guidelines to nearly all of their funds. This model provided companies with clear, coherent signals regarding investor expectations for governance, strategy, and risk management.

Today, that model has fundamentally changed. Market developments and increased regulatory and public scrutiny have compelled the Big 3 to split their stewardship programs into two distinct teams, separating responsibilities between teams that oversee index products and those that manage active strategies.

In 2026, companies will have to engage with six separate stewardship constituencies, each with its own perspectives, mandates, and strategies. This fragmentation will require more efforts from companies regarding their engagement with the Big 3.

Fragmented Voting Through Pass-Through Mechanisms

Historically, the Big 3 have aggregated the shares held in their funds and voted them as a bloc, according to house guidelines. This approach streamlined engagement timing and coordination, and made institutional investor voting largely transparent and predictable. The Big 3’s continued rollout of “pass-through” or “voting choice” programs, empowering the funds’ underlying investors to direct how their shares are voted, has introduced a new layer of complexity.

Now, voting power is dispersed across thousands of fund investors, whose instructions often filter through a complex web of intermediaries. This will further obscure how large institutional investors will vote.

Engagement on Ice Following New SEC Guidance

For many institutional investors, maintaining eligibility to file beneficial ownership reports on Schedule 13G — the short-form disclosure available to investors who own more than 5 percent of a company’s shares but do not aim to influence control — is critical. But in February, SEC staff issued new guidance narrowing the activities that investors can engage in consistent with a non-control intent, chilling shareholder engagement.

Institutional investors have become more cautious in how they communicate with companies. They hold fewer engagement meetings and avoid topics that could be perceived as attempting to influence management or board decisions, leaving companies with much less insight into investor expectations.

Diminishing Proxy Advisor Influence?

Institutional Shareholder Services and Glass Lewis remain deeply integrated into proxy voting workflows, and their recommendations have long had an outsized influence on voting outcomes. In 2026, however, both firms could see their influence begin to wane.

On December 11, 2025, the White House issued an executive order entitled, “Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors.” While this executive order did not include the “broad ban” on shareholder recommendations that some commentators expected, it directed increased regulatory scrutiny of proxy advisory firms, including potential SEC, Department of Labor, and FTC action against them.

The order follows months of public criticism from policymakers and corporate leaders, as well as an ongoing FTC antitrust investigation into the two firms. Although the order leaves existing proxy rules in place, it points to a more aggressive regulatory stance that may influence how investors use proxy advisor recommendations.

As a result, companies should expect more variability in how investors rely on proxy advisor recommendations and ultimately in investor voting behavior. At the same time, increased scrutiny may prompt the proxy advisors themselves to adjust elements of their methodologies, engagement practices, or disclosure standards in response to evolving expectations from regulators, issuers, and clients.

Implications for Companies

Taken together, these four developments raise the likelihood of unwelcome proxy season surprises, creating numerous challenges for companies. In the year ahead, companies may face a more diverse and decentralized set of decisionmakers, inconsistent disclosure demands across investor segments, higher solicitation and communications expenses, new operational and timing hurdles, and heightened compliance and recordkeeping complexities, just to name a few.

Vigilance and disciplined preparation will be crucial for managing the uncertainty. But where should companies train their focus? Three best practices can put companies on solid footing before proxy season begins.

1. Tailor your engagement. Develop a detailed stewardship map for all of your large investors, identifying decisionmakers for each stewardship team, along with their mandates, voting patterns, and policy emphases. This work involves tailoring engagement to address each team’s unique concerns while maintaining a consistent core narrative on strategy, performance, and oversight across all engagements.
2. Simplify your proxy materials. Pass-through voting expands participation to new investors of varying levels of sophistication. Proxy materials should be “retail-ready”: plain-English explanations of proposals, clear rationales for board recommendations, FAQs, simple visuals, and digestible summaries.
3. Preserve the dialogue. With one-on-one engagements becoming more guarded, companies must rethink how they can deliver their intended messages and draw useful feedback while respecting regulatory sensitivities of investors.
   • In private meetings. Use structured, pre-set agendas to help preserve meaningful dialogue and reassure investors that discussions won’t involve soliciting vote commitments.
   • In public communications. Expand communications to promote the company’s strategic priorities and operational and governance strengths, and to showcase the board’s skillset to make sure that these messages reach a broader voter base.

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