Environmental, social and governance (ESG). M&A. Short attacks. Every year, executive suites and boards are warned of the shareholder threats likely to dominate the next 12 months, and 2026 is no exception.

As another proxy season looms, ‘vote-no’ campaigns are the danger of the moment and have the potential to scupper corporate plans from New York to Tokyo.

Sometimes known as ‘withhold’ campaigns, vote-no campaigns are an alluringly simple way for disgruntled shareholders to make their presence felt. Asking investors to vote against the election of one or more directors – but without offering up alternatives – is a strategy far cheaper and faster than old-school proxy fights.

As so often, these strengths are reflected in the numbers, with Diligent Market Reporting finding there were 33 vote-no campaigns in the year to June 2025, up 10 from 2024.

The vote-no threat

Beyond the headline numbers, ‘withhold’ activism is rising across corporate boardrooms. That is clear enough among US firms just in the last few months. Notably, fast-food firm Jack in the Box’s board chair faced a campaign from an institutional investor.

Nor is the US unique here. In Japan, the chief executive at manufacturing firm Taiyo was challenged by a vote-no campaign, while ESG activists in London pulled the same trick with BP.

How, then, to explain these varied fights? The answer ultimately involves contrasting vote-no campaigns to traditional proxy fights. The latter, after all, imply a hostile takeover of a company, or at least an attempt to force a particular policy on unwilling executives.

Such fully fledged battles are unsurprisingly expensive, with activists spending an average of $1.8m during the 2025 season. They are time-consuming too, often encompassing a barrage of solicitation efforts, from private meetings to public letters, and to media rounds. Incidentally, Accenture has found proxy fights typically last a full year.

Compared to all that, vote-no campaigns are appealingly straightforward. As the name suggests, they are basically negative in outlook – not aiming to impose policies or board members, just expelling stalwarts or perceived underperformers from their posts. That immediately cuts costs, with activists not needing to identify and promote their own nominees, even as savings are obvious elsewhere too.

Consider here the time and cost of repeated press releases. Withhold campaigns can be instigated with a single public letter, explaining why a shareholder plans to vote against a particular director. Cheap in its minimalism, this approach also is not considered solicitation under Securities and Exchange Commission rules. Only by expressing an opinion, it does not campaign for alternatives, making it cost-effective from a regulatory perspective too.

All the while, the speed of vote-no campaigns can make them a boon for activists – and a threat for executives and boards. Putting aside the limited need to produce campaign materials, they can also be started even after advance-notice deadlines for proxy votes have passed.

And if that again hints at the basic flexibility of vote-no activism, so too do the intended outcomes. To be sure, many withhold campaigns are aimed at dislodging specific nominees for perceived mistakes. If shareholders are even contemplating voting against a board nominee, something has already gone seriously wrong.

At the same time, withhold campaigns are often less about particular personalities, and more simply a way of expressing shareholder discontent. In May 2025, for instance, an institutional investor with a 7 percent share in WEX launched a vote-no campaign against several company directors – less an indictment of them, and more because the payment services giant had refused to split its business segments and open up board seats.

And if that again speaks to the pleasing adaptability of vote-no activism – for activist investors anyway – so too does the fact that even defeat can spark change. That is arguably true at Harley-Davidson. The motorcycle firm’s directors may have won re-election to the board, yet its chief executive still retired soon after. Activists piled on similar pressure at WEX, with shareholder support for board nominees slumping by 30 points and the insurgents planning to propose their own candidates at the next AGM.

A serious challenge

All told, then, there are plenty of reasons for executives and board members to worry about vote-no activism.

More fundamentally, complacency over vote-no campaigns is deeply damaging for what it says about a firm’s investor engagement stance. If angry shareholders have reached the point where they are actively campaigning against incumbent board members – either to genuinely depose them or merely make some general point about a firm’s failings – executives have failed already.

That is especially true when savvy leaders have countless tools to keep shareholders onside: stock surveillance platforms that help them spot aggressive investors before they strike are the first line of defence. In addition, companies that conduct year-round shareholder engagement and audits of their governance framework stand a much better chance of heading off such campaigns.

“Combined with the reputational damage caused by vote-no campaigns – and the ease and low cost with which investors can now launch them – serious executives can no longer afford to ignore withhold activism.”

Particularly vulnerable companies should use their proxy solicitor, investor relations and legal team to develop an activist preparedness audit to identify ownership concentrations, voting vulnerabilities, governance gaps and messaging weaknesses early – so they can proactively engage shareholders, reinforce support and head off potential ‘vote-no’ campaigns before they gain traction.

Combined with the reputational damage caused by vote-no campaigns – and the ease and low cost with which investors can now launch them – serious executives can no longer afford to ignore withhold activism.

In this evolving landscape, the most forward-thinking boards treat proxy season not as an annual event but as a year-round discipline. Partnering with an experienced proxy solicitor early can be transformative.

Beyond execution during contests, a skilled firm brings deep expertise in vote modelling, shareholder intelligence and targeted outreach strategies that maximise support for management’s nominees and initiatives. By stress-testing vulnerabilities and crafting precise messaging well in advance, companies can bolster voting outcomes, strengthen board credibility and turn potential threats into opportunities for deeper investor alignment.

In the end, the boards that thrive are those that engage relentlessly – and leverage professional proxy expertise to ensure their message lands effectively when it matters most.

Artificial intelligence is beginning to reshape how institutional investors approach stewardship, particularly in the high-stakes areas of executive compensation and board elections. As asset managers look for ways to evaluate more ballot items with greater speed and precision, AI is emerging as a powerful tool for analyzing pay practices, governance structures, and voting patterns at scale. That shift has important implications for boards of public companies, especially as institutional shareholders apply increasing scrutiny to compensation committees and director oversight.

AI Gives Institutions the Ability to Conduct Proxy Analysis at Scale

One of the clearest effects of AI is the ability to scale proxy analysis far beyond what stewardship teams could historically do through manual review alone. AI tools can rapidly ingest proxy statements, compensation tables, peer pay data, governance disclosures, and prior voting outcomes, allowing investors to identify perceived outliers across large portfolios much faster than before. For issuers, that means compensation proposals and director slates are more likely to be screened against consistent criteria, with less room for weak disclosure, unclear rationale, or misalignment between pay and performance to escape attention.

AI is also likely to increase consistency in stewardship decision-making. Large institutional investors often manage voting across thousands of companies and multiple internal teams, and AI can help standardize how voting policies are applied from one issuer to the next. That can reduce uneven treatment, but it also raises the stakes for boards because issues that once may have been viewed as company-specific judgment calls can now be flagged more systematically, particularly where there are recurring concerns around compensation design, director responsiveness, or governance quality.

Deeper Scrutiny of Pay for Performance Alignment & Director Accountability

Another implication is deeper scrutiny of pay-for-performance alignment. Proxy advisers and institutional investors already assess whether executive compensation reflects long-term shareholder outcomes, and AI will likely make that assessment more sophisticated by connecting financial results, total shareholder return, incentive plan structure, disclosure quality, and prior voting history in a more integrated way.

The same logic extends to board elections. AI can help stewardship teams identify patterns involving director over boarding, committee accountability, poor responsiveness to shareholder concerns, or governance structures that appear out of step with investor expectations. In practice, that means voting decisions on directors may become more data-informed and more closely tied to a board’s handling of compensation, disclosure, and shareholder engagement over time.

Advance Preparation is Critical

This environment makes advance preparation more important, not less. Where AI-driven review is surfacing potential red flags earlier, boards and executives should work with their proxy solicitor well before the proxy is filed to conduct vote projections, pressure-test compensation proposals, identify likely institutional shareholder concerns, and refine disclosure around the committee’s rationale. Proxy solicitors can help management and directors map investor priorities, organize outreach, and assess whether the company’s pay narrative will withstand review by institutions that are now using Ai as a key input in their decision-making.

For companies, the takeaway is clear: as investor stewardship becomes more technology-enabled, successful outcomes will depend not only on the substance of compensation and governance decisions, but also on how effectively boards prepare, explain, and defend them to the institutional shareholders who ultimately decide the vote.

Financier Worldwide discusses hostile M&A and shareholder activism with Etelvina Martinez, Michael Vogele, Reid Pearson and George Rubis at Alliance Advisors, and Sean Donahue at Paul Hastings LLP.

FW: How do you see shareholder activists balancing traditional value‑creation demands – such as M&A, capital allocation and governance reforms – with emerging themes like operational efficiency in the current market environment?

Donahue: Shareholder activists have recently been balancing traditional value‑creation levers with operational themes by becoming more targeted and thesis‑driven. With M&A markets still uneven and financing conditions tighter, activists continue to emphasise capital allocation discipline, board accountability and strategic portfolio moves – but they now pair these demands with sharper operational critiques. Campaigns in 2025 showed activists using operational efficiency as evidence of management credibility: benchmarking margins, scrutinising cost structures and tying governance reforms to execution risk. At the same time, evolving regulatory expectations and increasingly polarised shareholder proposals have pushed investors back toward fundamentals. Companies that articulate a coherent strategy linking capital deployment, governance and measurable operational progress tend to blunt activist narratives early, while those that drift invite focused, high‑conviction campaigns.

Universal proxy mechanisms in the 2025 season continued to reshape leverage in proxy contests, but the balance of power has become more nuanced.

— Sean Donahue

FW: How are activists adapting their tactics – such as campaign messaging, coalition building or use of media channels – to increase pressure on target companies?

Martinez: Activists are increasingly more sophisticated and targeted in how they apply pressure to companies. In recent years, messaging has expanded beyond purely financial and stock price performance, to encompass themes including governance practices, executive compensation, sustainability commitments and other themes that resonate with a wider range of stakeholders. This broader framing helps activists build credibility with audiences beyond just investors. Media strategies have also evolved. It has become more common to see these blend traditional financial press with other channels like social media or campaign-specific websites. Coalition building has always been a cornerstone of activism, but is becoming more critical in the current environment where proxy adviser influence may be eroding and institutional voting grows more fragmented.

Activists have been known to borrow shares before the record date to temporarily increase their voting block.

— George Rubis

FW: How have universal proxy mechanisms and evolving voting dynamics shifted the balance of power in proxy contests and settlement negotiations?

Donahue: Universal proxy mechanisms in the 2025 season continued to reshape leverage in proxy contests, but the balance of power has become more nuanced. Activism volumes remain high, with US campaigns up roughly 11 percent year over year and boards settling faster and earlier as universal proxy modelling improves. While activists still benefit from the ability to target individual directors, 2025 dynamics showed that universal proxy has not unleashed a wave of full contests; instead, it has encouraged partial refreshes, withhold campaigns and data-driven negotiations. At the same time, large passive investors – particularly the ‘big three’, BlackRock, Vanguard and State Street Global Advisors – retain significant influence over director elections, reinforcing the premium on director level credibility, transparent governance processes and defensible advance notice bylaws. Well-prepared issuers now counterbalance activist leverage through targeted engagement and clearer articulation of board skills and strategy.

Changes are becoming clear as investors rely more on artificial intelligence to assist with voting decisions.

— Reid Pearson

FW: How has the current movement by a number of major institutional investors to more AI-driven voting policies and methods impacted contested solicitations?

Pierson: Changes are becoming clear as investors rely more on artificial intelligence (AI) to assist with voting decisions. Certainly, the influence of proxy advisory firms Institutional Shareholder Services and Glass Lewis will continue to wane. Investors will focus more on their own internal models to evaluate key drivers in a proxy contest, such as financial performance, governance and board, and activist proposals. Not only will AI-driven voting policies drive specific voting outcomes at the institutional level, but we will see different voting among specific funds at the same institution, particularly at actively managed funds. This will make projecting vote outcomes more difficult during a contested solicitation. Both activists and companies will need to evolve the way they engage with shareholders. Historically, both parties have relied on a similar message, usually conveyed in a lengthy deck as well as filings. With the influence of AI, the message from the activist and company will need to be very tailored to not only the investor but the underlying fund manager. It is critical that companies and activists have a clear understanding of the shareholder base, particularly in a high stakes contested solicitation.

FW: Could you explain how stock loan and shorting impact activism?

Rubis: Shares on loan and shorted stock can have a meaningful impact on shareholder activism, mainly because they affect voting power and who controls the vote at the record date. The borrower of the shares receives the voting rights. As a result, the original owner of the shares – the lender – loses the ability to vote. Activists have been known to borrow shares before the record date to temporarily increase their voting block. The slight difference between shares on loan and stock that is shorted is that the latter has been sold into the market and now the new buyer of the stock holds the voting rights.

Repeated weak director votes may indicate governance concerns or gaps in risk oversight.

— Michael Vogele

FW: What indicators or early warning signs should boards monitor to assess their vulnerability to unsolicited bids or activist driven strategic demands? What preparedness programmes are available so that a board can proactively stay ahead of, or be better prepared for, a possible activist event?

Vogele: Boards should closely monitor shareholder voting outcomes. Particularly when recurring over multiple years, support well below 85 percent for director elections or advisory votes on executive compensation signals meaningful shareholder dissent. Repeated weak director votes may indicate governance concerns or gaps in risk oversight, while persistently low support on compensation proposals often reflects a perceived disconnect between pay and performance and potential misalignment with long-term strategy. An underperforming three- or five-year total shareholder return relative to peers can further heighten these vulnerabilities and attract activist attention. Proactive engagement is critical. Boards should use their proxy solicitor to help them reach out to the stewardship teams of major institutional investors to understand concerns and address them early – whether related to pay design, director qualifications or risk management. Institutional investors typically favour constructive dialogue and demonstrable improvement over adversarial campaigns. Companies can use proxy solicitors to design a year-round shareholder engagement strategy that utilises Form N-PX filings to analyse vote returns. In addition, boards can utilise solicitors and legal teams to conduct an activist preparedness audit, which should include a governance benchmarking analysis to helps spot weaknesses in a company’s governance framework.

Coalition building has always been a cornerstone of activism, but is becoming more critical in the current environment.

— Etelvina Martinez

FW: In your experience, what distinguishes successful defensive strategies from those that ultimately strengthen an activist’s case during a contested situation?

Donahue: Successful defensive strategies over the past few years share a consistent pattern: they confront the activist’s thesis directly with credible, data-driven analysis and demonstrate that the board is acting decisively. In 2025, for example, uncertainty, tariff-related developments and select Securities and Exchange Commission proposals drove some activist investors to reassess engagement practices, increasing scrutiny on whether boards were genuinely responsive. Companies relying on procedural manoeuvres or generic messaging often reinforced activists’ claims. Meanwhile, activism levels remained near long-term averages but grew more chaotic in tone, making disciplined sequencing and clear operational milestones even more important. The defences that failed appeared reactive or insular, while the ones that succeeded articulated a forward path more compelling than the activist’s alternative.

FW: Looking ahead, what structural or market conditions do you expect will most influence the next wave of M&A-related activism, including hostile or contested approaches?

Pierson: The next wave of M&A-related activism – especially hostile or contested approaches – will be driven by stronger equity markets, changing regulations, distressed opportunities and more advanced activist tactics. Activists will lean harder into M&A situations, as they are emboldened by improved dealmaking conditions, a universal proxy card and heightened sponsor appetite. Rising equity markets have historically inspired activists by increasing their assets under management. The universal proxy card has lowered the costs associated with contested situations, making them more viable. Activists are increasingly aligning with private equity sponsors to gain added leverage in their campaigns, and companies facing operational underperformance will continue to be prime targets of activism. In addition, activists are now employing more sophisticated digital strategies, such as multimedia campaigns, causing faster public escalation without the cost or delay associated with private engagement. These factors will collectively contribute to a surge in sponsor-led activity and create conditions in which activists will feel increasingly empowered to push for sales, breakups and contested transactions.

Overview

In what promises to be a groundbreaking year, the 2026 proxy season will play out alongside an ambitious SEC regulatory agenda with a focus on supporting innovation, capital formation, market efficiency and investor protection.

The SEC’s near-term priorities include establishing a regulatory framework for crypto assets, expanding investor access to private markets, easing compliance burdens, re-anchoring disclosures in materiality, and reforming securities litigation to curb frivolous lawsuits¹.  The Commission is additionally fast-tracking a rule change to allow public companies to switch from quarterly to semi-annual earnings reporting.

The proxy voting landscape is also being reshaped with the goal of “depoliticizing” shareholder meetings and restoring their focus to core corporate matters.  This will include an SEC proposal this spring to modernize Rule 14a-8 and, per a recent White House executive order (EO), consideration of new rules to regulate proxy advisory firms.

While these initiatives will not directly impact 2026 annual meetings, other trends and developments will inform contemplated regulatory actions and recast the company/shareholder dynamic in the future:

Much ado about omissions: For this year’s proxy season, the SEC made two significant regulatory shifts which will give companies more control over their annual meeting agendas: largely suspending its substantive review of no-action requests in favor of company discretion and restricting small investors from using Notices of Exempt Solicitation to promote activist campaigns.  Despite the outcry—and even lawsuits—from some shareholder proponents, companies have been judicious in their exclusion decisions, which are tracking in line with the proportion of proposal omissions in 2025.

Shareholder proposal volume shrinks:  After peaking in 2024, the overall volume of shareholder proposal submissions is continuing to contract, with environmental and social (E&S) filings at their lowest level in 10 years.  Proponents held back this year due to steadily declining support levels and last year’s SEC guidance—Staff Legal Bulletin (SLB) 14M— which eliminated the significant social policy override that had previously made it difficult for companies to exclude proposals. Filings of traditional governance resolutions remain robust with this year’s initial votes drawing strong investor support.

Less predictable voting outcomes:  Companies will find it increasingly challenging to forecast proxy votes and gauge shareholder sentiment due to fractured voting and limitations on investor engagements.  As a result of the SEC’s revised guidance last year regarding Schedule 13G eligibility, investors’ engagement discussions have become more circumspect and their proxy voting policies have become more opaque in terms of their voting intentions.  In addition, the Big Three—BlackRock, Vanguard and State Street–have split their stewardship teams which may lead to a divergence in their voting policies over time.  They are also expanding their voting choice programs, which give their clients the ability to follow either in-house or third-party voting policies.

Diminishing proxy advisor influence:  In the face of mounting regulatory and legal pressure at both the federal and state levels, Institutional Shareholder Services (ISS) and Glass Lewis are rethinking their business models in ways that will lessen their influence on shareholder meeting votes. This will become more pronounced in 2027 when Glass Lewis retires its benchmark voting policies and migrates its clients to customized guidelines reflecting their individual stewardship priorities.  Several major asset managers are also distancing themselves from the proxy advisors by bringing their proxy research, data collection and voting in-house, aided by artificial intelligence (AI) technology.

Retail votes will become more consequential:  Individual investors will gain in prominence in proxy votes and corporate communications as a result of pass-through and auto-voting programs.  This season, Exxon Mobil will debut its retail voting program, which allows its retail shareholders to automatically cast their votes in line with the board’s recommendations. Broader adoption by the corporate community could substantially diminish the influence of shareholder activists and special interest groups.

This report delves further into these and other key issues that will impact the 2026 proxy season and beyond.

Shareholder Proposal Omissions

Shareholder proposal omissions are being closely tracked this season following the SEC’s announcement last fall that, due to resource constraints following the government shutdown, it would not be adjudicating no-action requests through September 2026, other than those based on Rule 14a-8(i)(1) where the proposal is not a proper subject for shareholder action under state law.  Companies are at their own discretion in deciding what resolutions to leave off ballots based on the provisions of Rule 14a-8, prior published guidance, and/or judicial decisions.

The SEC additionally revised its Compliance and Disclosure Interpretations (C&DIs) on proxy rules and schedules, stating that it will object to “voluntary” Notices of Exempt Solicitation that are filed by persons owning less than $5 million of the company’s shares, primarily to generate publicity for their shareholder resolutions and “vote no” campaigns.  This has forced shareholder activists to come up with alternative communication channels to share their views on proxy ballot items with other investors².

Omission Trends

Overall, companies have been cautious in their exclusion decisions to avoid investor backlash, which could take the form of opposition to directors, negative publicity and even litigation.  Over half (58%) of the announced omissions were governance proposals, largely sponsored by John Chevedden, of which about one-third (35%) were flagged for procedural deficiencies and 19% were considered substantially implemented, primarily due to a management proposal on the ballot that essentially fulfilled the request.  Nearly half (42%) of the E&S resolutions scheduled for exclusion were regarded by companies as ordinary business (see Table 1).

No company has yet sought no-action relief based on the SEC’s state law carve-out.  Last fall, SEC Chair Paul Atkins suggested that Delaware law does not accord shareholders with a fundamental right to submit precatory proposals³¹.  If a company obtains a legal opinion that precatory proposals are not a proper subject for shareholder action under state law, the SEC staff will likely defer to that position.

Atkins also said that a shareholder proposal that does not meet Texas’s eligibility requirements may be excludable under Rule 14a-8(i)(1).  Last year, the state amended the Texas Business Organizations Code (TBOC) to allow Texas corporations that opt into Section 21.373 to restrict the submission of shareholder proposals to a single or multiple holders of at least $1 million in stock or 3% of the voting shares, whichever is less.  This ensures that shareholder proposals carry the backing of investors with significant, sustained financial interests in the company.  Several companies—including Forward Industries and Texas Capital Bancshares–are availing themselves of this measure as part of their moves to Texas.  At its April 21 annual meeting, Texas Capital Bancshares will hold a separate advisory vote on whether to be governed by the provision.

Investor and Proxy Advisor Reactions

Through April 10, none of the omissions sparked any strong repercussions from investors or proxy advisors in terms of opposition to directors at annual meetings (see Table 2).  Glass Lewis indicated that it will not raise concerns regarding technical omissions, such as submission timeliness and proof of stock ownership, but it will review other types of exclusions case by case.  ISS said that it will not substitute its judgment for that of the SEC in determining whether a proposal is properly excludable under Rule 14a-8.  However, it expects companies to provide clear and compelling reasons for ordinary business and substantial implementation exclusions in their proxy statements³. Failure to do so may be regarded by ISS as a governance failure, which will be flagged in the proxy report or, in rare circumstances, result in a negative ISS recommendation against one or more agenda items, such as the election of directors.

Lawsuits Emerge

Some shareholder proponents are resorting to litigation to keep their proposals on proxy ballots or, in the case of the Interfaith Center on Corporate Responsibility (ICCR) and As You Sow, to block the SEC’s continued implementation of its no-objection policy⁴ ICCR also posted on its website examples of “egregious” unilateral omissions.⁵

Of the six lawsuits filed against companies, three have settled.  AT&T and PepsiCo reached agreements with the New York City Retirement Systems (NYCRS) and the People for the Ethical Treatment of Animals (PETA) Foundation, respectively, not to exclude their resolutions on workforce diversity and animal welfare.  Axon Enterprise also settled a lawsuit filed by the Nathan Cummings Foundation by agreeing to provide detailed annual disclosure of its direct political spending over the next five years.

Still pending are lawsuits against BJ’s Wholesale Club, Chubb, and UnitedHealth Group, which plan to omit resolutions filed, respectively, by the New York State Retirement Systems (NYSCRF), As You Sow and ICCR member Fonds de Missions.  The proposals, which were deemed to constitute ordinary business, deal with deforestation risk, subrogation claims against fossil fuel companies, and the impact of acquisitions on the healthcare system.  In late March, a D.C. federal judge denied As You Sow’s request for a preliminary injunction on the basis that it did not show any likelihood of prevailing on the merits.  However, the judge also declined to dismiss the complaint at this early stage⁶.
The legal actions appear to be having a chilling effect on some companies’ omission decisions.  A number of firms, such as Goldman Sachs Group and Huntington Ingalls Industries, have chosen to include shareholder resolutions in their proxy materials, notwithstanding their view that they could have been properly excluded.⁷.

State Street Investment Management (SSIM)–formerly State Street Global Advisors (SSGA)–has published its 2026 global voting policy updates which are effective April 2026¹.  The material changes, which are discussed below, include embedding financial performance into certain policies, streamlining the framework for evaluating shareholder proposals, and disclosing the guidelines followed by the asset stewardship team when engaging with U.S. public companies.

Financial performance

SSIM has incorporated financial performance, based on total shareholder return (TSR) relative to the company’s Global Industry Classification Standard (GICS) sector, into its assessment of board composition, board oversight of risks and opportunities, and executive compensation. It has removed board diversity factors from its discussion of board quality and composition.  It has also eliminated its section on board oversight of geopolitical risk.

Evaluation of shareholder proposals

In evaluating shareholder proposals, SSIM will consider whether adoption would promote long-term shareholder value in the context of its core governance principles:  effective board oversight, quality disclosure and shareholder protection.  It has removed its previous factors for supporting a shareholder proposal which, in the case of disclosure requests, included satisfying SSIM’s detailed disclosure criteria on issues such as climate change; nature and biodiversity; human capital management; diversity, equity and inclusion (DEI); human rights; and political activities.

Shareholder rights

SSIM has removed its explicit preference for a 25% or less ownership threshold for shareholders to call a special meeting or act by written consent.

Engagement policy

SSIM has added an appendix with guidelines on how its asset stewardship team will conduct engagements with U.S. public companies.  In keeping with last year’s SEC guidance on passive/active investor status, SSIM’s discussion parameters underscore that it does not seek to influence or change control of any issuer, including the following:

• It will not discuss how it intends to cast its vote on any particular ballot item or its rationale for any vote it has made.
• It will not dictate or pressure companies to adopt or change any policies or fundamental business choices.
• It will not engage in discussions that explicitly or implicitly suggest contingent voting or divestment if a company does not adopt SSIM’s viewpoint on a particular item, or that suggest that any particular factor, policy or practice is dispositive in its engagement or voting decisions.

SSIM expects its U.S. portfolio companies to set engagement meeting agendas.  The stewardship team will be in “listen-only” mode during discussions of the following topics with either companies or investors soliciting SSIM’s votes in connection with contested shareholder meetings, “vote no” campaigns, or shareholder proposals:

• Contested director elections
• Adoption of a climate transition plan
• Adoption of specific targets for emissions reduction
• Disclosure, reduction or adoption of a policy on Scope 3 emissions
• Changes to the company’s capital allocation

SSIM further states that it does not apply, nor will its stewardship team discuss, specific targets or thresholds of gender, racial or ethnic diversity in connection with U.S. portfolio companies.

Proxy voting process

In its overview of its asset stewardship program, SSIM deleted references to its use of Institutional Shareholder Services (ISS) to facilitate the execution of its proxy votes, including acting as its proxy voting agent, assisting in applying SSIM’s voting policy, and providing research and analysis relating to general corporate governance issues and specific proxy items. 

Introduction

2025 marked a decisive shift in the UK investment trust landscape. What began as a prolonged period of wide discounts evolved into a sustained test on balance sheets, permeating into corporate governance, as boards were increasingly required to demonstrate that the closed-ended structure continued to serve shareholder interests.

At the centre of this shift was a series of high-profile activist campaigns led by Saba Capital, whose actions since late 2024 have reshaped expectations around board accountability, corporate actions, and shareholder engagement across the sector.

Our analysis examines these developments through a governance, M&A, and activism lens, highlighting how shareholder expectations have evolved and why boards are increasingly judged on their ability to deliver tangible outcomes within the closed-ended structure. Alongside this, Nepean’s contribution provides a complementary perspective on the strategic communication challenges facing boards, particularly in the context of the Saba campaigns.

Activism in Focus: Saba Capital’s Campaigns (Late-2024 to 2025)

Since the end of 2024, Saba Capital has mounted coordinated campaigns across multiple UK investment trusts, seeking outcomes ranging from board change and enhanced discount-control mechanisms to structural reform, including mergers, wind-ups, or conversion to open-ended vehicles. While many of Saba’s formal resolutions were ultimately defeated, the broader impact of these campaigns has been significant. The activism demonstrated that:

• large shareholders are prepared to challenge the legitimacy of the closed-ended structure where discounts persist;
• board composition, tenure, and responsiveness are now regularly challenged; and
• corporate actions once considered exceptional are increasingly viewed as normal.

For issuers, the key lesson is that “Winning the vote” is no longer the end-game. Even unsuccessful activist campaigns have materially influenced board behaviour, disclosure standards, and strategic positioning. Activists are also focusing on their financial returns, which they believe will be enhanced by making changes to the governance structure of funds.

Developments since 2025 suggest a further escalation. Activism is no longer limited to proposing change, but increasingly about controlling outcomes. Large shareholders have demonstrated their ability to block strategic transactions, including mergers. They have also shown the ability to shape board decisions indirectly through ownership concentration. Overall, the events represented a meaningful shift in board dynamics. It is also a reminder that activism can evolve from persuasion to leverage.

Net Asset Value (NAV) Discounts as a Governance Indicator

Perhaps the most enduring theme of 2025 was the treatment of discounts to Net Asset Value (NAV) as a live measure of governance quality. For investment trusts, the market’s message was clear:

• Persistent discounts are no longer seen as a purely cyclical or technical issue;
• They are interpreted as a reflection of board effectiveness, engagement quality, and structural credibility.

Where discounts remain elevated despite buybacks and engagement, investors are increasingly questioning whether the closed-ended structure itself remains appropriate.

The Impact of US-Style Activism on UK Investment Trust Sector

Saba’s role is particularly noteworthy given its identity as a US-based hedge fund exerting influence over UK-listed investment trusts. This has introduced several new dynamics into the market:

1. A different activism playbook: Unlike traditional UK stewardship-led engagement, Saba’s approach has been more overtly transactional and structural, framing persistent discounts as evidence of governance failure rather than market conditions. This has accelerated the pace at which boards are expected to respond.

2. Shareholder concentration risk: Saba’s campaigns highlighted how significant minority stakes can be leveraged to block or influence corporate actions, including mergers. This has sharpened boards’ focus on developing a more granular understanding of their shareholder base and the risks associated with concentrated ownership.

3. Market-wide signalling effect: Even where Saba did not prevail, its campaigns signalled to other investors that boards can be challenged and that the investment trust sector is increasingly open to activist intervention.

Implications for Boards and Issuers

As a result, issuer expectations have shifted: boards are now expected to anticipate activism, not merely respond to it. The experience of 2025 suggests that inaction is now the highest-risk strategy.

The developments across 2025 give rise to several clear governance implications:

1. Engagement must be proactive, not reactive: Waiting for an activist requisition before engaging shareholders is no longer sufficient. Boards are expected to demonstrate a deep understanding of strategy and the systemic risks to the funds.

2. Structural questions cannot be deferred indefinitely: Where discounts persist despite buybacks and engagement, boards should expect pressure to consider more fundamental options, including consolidation or conversion.

3. Corporate actions require activist-proofing: M&A proposals must be stress-tested against shareholder fairness, mandate alignment, and value transfer optics.

4. Shareholder register monitoring is critical: Understanding who holds influence—and how that influence might be exercised—has become a core governance responsibility

5. Structural changes must be considered for contingency: Boards should not wait until pressure escalates to consider alternatives such as mergers, wind-downs, or structural change.

Conclusion: 2025 as an Inflection Point

For UK investment trusts, 2025 was an inflection point. Developments into 2026 suggest it is becoming something more — a structural reset in governance expectations.

The combination of sustained activism, persistent discounts, and increasingly contested corporate actions has fundamentally altered how boards are assessed.

For issuers, the lesson is not that activism must always be resisted or conceded, but that credible governance, clear strategy, and early engagement are now essential defences. In these events, governance is measured by how well the board translates strategy into fruitful shareholder outcomes.

As the sector moves forward, boards that can articulate why the closed-ended model works, and how they will protect shareholder value within it, will be best placed to navigate the next phase of scrutiny.

Efficiency. Transparency. Speed. Shareholders expect more than ever from corporate communications, even as studies suggest that 80 percent of a firm’s valuation is linked to investor relations (IR) activities. And as so often in our febrile digital world, it is tempting to see the solution contained in just two letters: AI. Certainly, the numbers here are once again compelling, with over four out of five insiders believing AI can make IR both faster and more streamlined.

To an extent, this overwhelming enthusiasm makes sense. Quite aside from the clear potential of AI across the broader culture, machine learning systems can parse and analyse vast amounts of data more or less immediately. Yet if that has manifest advantages for IR professionals, especially when dealing with thousands of shareholders at once, caution is still required. In the end, corporate communications are meant not for robots but people — with AI there to amplify, not replace, the value of flesh-and-blood IR teams.

Amplification not automation

Perhaps the clearest limitation of ‘tech-first communications’ is contained in the term itself. Technology, whatever its strengths, is ultimately just a collection of ones and zeroes, lacking the subtlety of an actual human being. Despite this obvious truth, and the fact that AI has only been around for a couple of years, IR teams have already been punished for ignoring it.

This is true even at the world’s biggest companies. At the 2023 launch of its Bing AI tool, for instance, a Microsoft marketing executive asked the system to summarise Gap’s IR site – only to be given answers filled with errors.

And even if teams avoid such awkward embarrassments, the truth is that ‘off the shelf’ AI platforms are designed by developers who do not always grasp the nuances of IR. Any IR professional worth their salt knows that tone, timing and context are key to keeping shareholders happy, with surveys highlighting personalised relationship building as fundamental to the role.

In other words, if left alone AI will never truly succeed, especially when over a third of chief financial officers report that IR communications are becoming more frequent and urgent, increasing the room for mistakes.

The solution is to craft AI platforms alongside IR professionals, appreciating their needs without removing their agency. In practice, this means seeing AI as a workforce multiplier, particularly when it comes to computational tasks that do not necessarily require the personal touch.

There are plenty of case studies here, not least when enterprise AI can perform literally trillions of sums a second. One example might involve using AI to flag abnormal stock movements, allowing executives to spot short attacks early. Elsewhere, AI could be deployed to analyse historical trading patterns, predicting what institutional investors will do next.

Even a cursory look at the figures shows how useful such number-crunching can be, with AI set to save white-collar workers 12 hours a week by 2029 — even as proxy fights at Exxon and Disney were partly won by lightning-fast campaigns.

Yet the broader point is that AI is only the first stage of the IR process. Once the algorithm has provided the data, it is up to the human team to act, whether by sending a chief executive letter or drafting a conciliatory press release.

The same is true even when AI takes on a more intimate role. Imagine, for instance, that a corporate is planning an investor day. AI is invaluable for finessing scripts – tightening tone and pacing, and so on – but a living, breathing executive must finally step up and give the speech.

In a similar vein, AI can help with other documents, drafting Q&As or earning reports. Yet they must still be finessed by hand, with shareholder sentiment and ongoing activist campaigns just two important factors to consider. This same rule applies even when AI is conscripted to more offbeat tasks. Yes, IR officers are exploiting AI to brief results in multiple languages or instantly generate podcasts. But that means little if the grammar is off or the voices inaudible.

To put it differently, then, AI is about more than mere speed, and rather represents an opportunity for corporates to work smarter, enhancing results even as they cut workloads. As so often, industry polling is revealing here, with AI especially popular among smaller media teams – those frantically juggling IR with more generic communication tasks.

From theory to practice: real‑world use cases

Across the IR landscape, teams are increasingly using AI‑enabled tools to track sentiment on platforms such as StockTwits and other social channels. This helps issuers understand how retail investors are reacting to press releases, earnings calls and investor days in near real time. These early indicators allow IR leaders to address concerns or misconceptions before they solidify and influence institutional conversations, transforming what was once a lagging signal into a proactive, early‑warning capability.

AI is also being adopted to streamline content development and review. Many IR teams now use AI to assist in reviewing earnings scripts and investor communications for clarity, tone and potential risk areas, compressing work that might previously have taken days or weeks into a matter of hours. Importantly, the goal is not to replace human judgment or generate copy autonomously, but to free experienced IR professionals to focus on messaging strategy, targeting and high‑value stakeholder engagement.

On the analytics side, advanced platforms are beginning to aggregate years of proxy, governance and market data to offer companies a real‑time view of shareholder activity, motivations and likely voting behaviour. As AI‑driven modelling features mature, issuers, advisers and financial institutions can run vote projections ahead of proxy contests or contentious meetings, allowing them to refine proposals and engagement plans based on predicted outcomes rather than assumptions.

Guardrails: governance, trust and ‘responsible AI’

As AI becomes more embedded in capital markets, both regulators and investors are sharpening their focus on how it is used.

On the governance side, a growing share of S&P 500 companies now disclose explicit board-level oversight of AI, with one recent review finding that such disclosures increased by more than 80 percent in a single year. Many boards are moving AI from a purely operational topic to a core risk and strategy issue.

Investors are sending similar signals. An EY survey of institutional investors in 2024 found that around one in five cited ‘responsible AI’ as a concern in their engagements with companies, and subsequent research indicates that proportion has since risen as awareness of AI risks has grown. At the same time, activist investors are pressing large technology and consumer companies, including Apple and Amazon, with shareholder proposals demanding greater transparency around AI, data collection and model usage.

For IR teams, that means two things. First, they need to be ready to explain how their company uses AI – in products, operations and decision making – in a way that is concrete, balanced and credible. Second, they must hold themselves to the same standard in their own use of AI: being clear about human oversight, data sources, accuracy checks and how they protect material non-public information.

This pressure is only likely to intensify. One recent industry forecast suggests that the AI enabled investor presentation software market could grow roughly fourfold by 2033, as both corporates and investors adopt more sophisticated tools for modelling scenarios, simulating votes and tailoring messaging. Activist funds are already experimenting with AI driven voting simulations and predictive analytics to stress test campaigns and anticipate management responses.

Against that backdrop, complacency carries both reputational and operational costs. The IR functions that will thrive are those that adopt AI early – but thoughtfully – and build a culture where human expertise is amplified, not sidelined.

Taken together, the message for IR leaders is clear. AI is no longer a distant buzzword; it is rapidly becoming a practical advantage – and, increasingly, a baseline expectation – in investor communications. But technology alone is not the differentiator. The real edge belongs to teams that blend human intelligence with digital amplification: using AI to see more, sooner, while still relying on experience, judgment and relationships to decide what to do next.

In an era when investors scrutinize every line of a proxy statement and every dollar of dilution, public companies are increasingly turning to vote projections to navigate the choppy waters of proxy season. These probabilistic forecasts, built on data, governance insight and disciplined scenario analysis, while remarkably accurate are not promises of outcomes but powerful decision-support tools. They help boards, counsel and corporate secretaries chart a course that aligns management’s strategic objectives with what shareholders are likely to approve.

Purpose: to provide a shareholder vote sensitivity analysis of potential outcomes of ballot items, including shareholder proposals, approval of equity compensation plans and increases in capital among other proposals.

What a vote projection does: A vote projection is a structured analysis that combines a company’s specific shareholder base, historical voting patterns, proxy advisor firm guidelines and influence and proposal specifics. Typically a company will want to run a few projection scenarios, as many proposals will be reviewed on a case-by-case basis by the proxy advisory firms and shareholders.

Ultimately, a vote projection will tell you whether a proposal is likely to pass a shareholder vote. In addition, a strong projection will give you a close sense of what the vote outcome is likely to be.

When are vote projections used: A vote projection can be used on any ballot item that is put before shareholders but in Alliance Advisor’s experience, the three most common ballot items are equity compensation plans, proposals submitted by shareholders and increases in authorized capital.

Equity Plan Proposals

Equity plan proposals (whether asking for new shares or an entirely new plan) are one of the most important ballot items put before shareholders. Performing a vote projection is an important step in the planning process. A projection analysis will inform you of the influence of ISS and how critical their support will be on the proposal… spoiler…rarely is ISS outcome determinative. Just as importantly, a projection will allow you to zero in on the number of shares your specific shareholder base is likely to support.

Benefits for Equity Plan Proposals:

Vote projections serve as an early-warning system to identify potential opposition before the actual vote. They allow time to address potential shareholder policy concerns and modify the proposal and disclosure, which reduces the risk of the proposal failing a shareholder vote.

They provide the foundation for targeted engagement and proposal optimization by pinpointing specific institutional investors likely to vote against. This in turn provides data to adjust the equity plan terms as disclosure to maximize shareholder support. In some cases, vote projections can indicate to management that they can seek more shares than originally proposed.

Proposals Submitted by Shareholders

Proposals submitted by shareholders are often nuisances for management but should not be taken lightly. Typically, companies want to see what the base line support would be to determine if the proposal will pass or fail and the likely vote outcome. This will help determine the appropriate proxy solicitation strategy.

Benefits for Proposals Submitted by Shareholders:

Based on the expected level of shareholder support it helps gauge whether aggressive opposition, neutral stance or acceptance is appropriate and prevents underestimating support for proposals that may pass.

Vote projections can also help with the overall proxy statement strategy and positioning of the proposal. It provides data to help craft more persuasive “Vote AGAINST” rationale based on shareholder sentiment and voting support levels, and identifies specific concerns to address in opposition statements. It can also help determine if voluntary adoption of proposal elements could defuse support.

Capital Raises

Increases in capital ballot items seek to increase authorized shares or cover private placements over 20 percent of the outstanding shares. Vote projections in this area can mean life or death for a capital-starved company, particularly small and mid-cap companies.

Benefits for Capital Raise Proposals:

For capital raises, certainty that the proposal will be approved by shareholders is the single most important benefit. Companies can reduce execution risk and enable better timing decisions by gauging shareholder support in advance. In addition, data gleaned from the research can help in identifying acceptable dilution thresholds, which help with structuring terms (warrants, conversion ratios, discounts) that maximize approval odds.

For exchange-listed companies requiring shareholder approval (e.g., >20 percent dilution under NYSE/Nasdaq rules) it helps determine if private placement or registered offering is a more viable option.

For capital-starved companies, a vote projection can help avoid failed offerings that damage market credibility. It can also help minimize legal and advisory costs from drawn-out campaigns and proxy solicitation cost associated with failed votes requiring re-solicitation.

In summary, vote projections are a valuable tool for gauging the success of any type of ballot item. They provide boards and management with actionable data on the likelihood of success, proxy solicitation strategy, and also demonstrate due diligence to board members and support informed decision-making. Companies looking to achieve certainty going into a shareholder meeting should reach out to a proxy solicitor with a demonstrable track record of delivering accurate vote projections.

Introduction

This cross-market comparison has been developed focusing on the United Kingdom and Germany, arguably two of the most sophisticated capital markets in Europe. Distinctions in specific voting guidelines and corporate governance expectations between these jurisdictions are not viewed as compromising the validity of this high-level statistical comparison.

To facilitate a robust dataset for meaningful analysis, the FTSE 100 was utilized for the United Kingdom, while a synthetic “DAX 90“ -comprising an aggregation of the DAX 40 and MDAX 50- was established to provide a comparable German peer group.

Therefore, we examined the voting activity of 15 top-tier global investors across 85 FTSE 100 and 82 DAX 90 constituents throughout 2025, with a total volume of 24,535 and 19,414 recorded investor votes, respectively. It is considered a substantial basis for evaluating voting behaviour against Institutional Shareholder Services (“ISS”) and Glass Lewis (“GL”) recommendations, the two preeminent global proxy advisory firms.

Key Findings

• Within the FTSE 100 and DAX 90 indices, alignment with positive ISS recommendations appears consistently high. In the FTSE 100, twelve investors exhibit an alignment of 99% or greater, whereas ten investors attain this threshold within the DAX 90. The remaining institutional investors nevertheless maintain substantial alignment rates, ranging between 91.7% and 98.7%.
• The negative ISS recommendations reveal a starkly different landscape. The peak alignment in the FTSE 100 reaches 96%, and 88.3% in the DAX 90. Furthermore, alignment rates fluctuate significantly, descending to as low as 19.1% in the FTSE 100 and 14.2% in the DAX 90.
• Regarding positive GL recommendations, the degree of alignment across both the FTSE 100 and the DAX 90 tends to be lower. While ten investors in the FTSE 100 maintain an alignment of 99% or greater, only three investors reach this level within the DAX 90.
• Concluding with negative GL recommendations, the highest alignment within the FTSE 100 stands at 72.2%, with a notable decrease to a floor of 17.7%. In contrast, the DAX 90 exhibits a higher peak alignment of 86.3%, while the minimum alignment observed is 29%.

Deconstructing the “Blind Following” Narrative

The high degree of alignment with positive proxy advisory recommendations suggests that proxy advisory mirrors an established consensus on core corporate governance topics.

In contrast, the lower alignment with negative recommendations indicates that investors’ internal voting guidelines are less rigid and thus frequently support agenda items even when ISS and/or Glass Lewis recommend against them. This highlights a distinct misalignment between the standardized recommendations of proxy advisors and the independent stewardship policies of individual institutional investors.

The (Secret) “Decision-Maker” Narrative

The discourse surrounding proxy advisory firms frequently invokes the narrative of a “secret decision-maker,” a theme that remains a staple of both professional discussions and media coverage.

While it cannot be entirely discounted that certain individual AGMs, if viewed in isolation, might suggest that proxy advice served as the primary catalyst for a voting outcome, our empirical data appears to challenge this assumption.

From Ex-Post Observation to Ex-Ante Strategy

ISS and Glass Lewis recommendations are strong statistical indicators, but their review is essentially passive and retrospective.

While our clients already benefit from a proprietary database granular enough to track & analyse specific agenda item types, achieving success at an AGM requires moving beyond reactive damage control. By shifting the focus to a proactive analysis of individual investor guidelines, companies can bridge the ‘governance gap’ long before a proxy advisory analysis is even published.

Ultimately, a positive outcome is determined by aligning corporate decisions and the meeting agenda with investors’ expectations well in advance of the shareholder meeting.

Statistics: FTSE 100 & DAX 90 vs. ISS & Glass Lewis

Comparison of the Peers: FTSE 100 & DAX 90

The following dataset details the voting activity of the fifteen selected institutional investors alongside their disclosed utilization of ISS and/or Glass Lewis (“GL”) advisory services. This data serves as the empirical foundation for the subsequent analysis of alignment or divergence with the proxy advisory recommendations.

• Sample Size and Investor Profile: The dataset encompasses the aggregate number of agenda items voted upon by each constituent investor across both indices. For instance, Amundi recorded votes on 1,798 items within the FTSE 100 and 1,570 within the DAX 90. It appears that investors utilizing index-tracking strategies naturally exhibit a higher volume of voted agenda items. Conversely, more concentrated or selective investors, characterized by a narrower scope of investee companies, demonstrate a correspondingly lower number of voted items.
• Weighting and Distribution: Within this peer group, the total volume of votes amounts to 43,949. The FTSE 100 accounts for 24,535 of these votes (55.8%), while the DAX 90 represents 19,414 (44.2%).
• Market Variance: The higher volume observed within the FTSE 100 appears to be driven by a greater aggregate number of votable agenda items per company in the UK market, rather than being a result of investor selection. As delineated in the “Methodology & Database” section, the analysis encompasses 85 of the FTSE 100 and 82 of the DAX 90 companies, reflecting a balanced corporate peer group despite the variance in absolute vote counts.

ISS Recommendations Alignment: FTSE 100 & DAX 90

Further illustrations can be found on the heatmaps and bar charts below.

ISS + = Voting +

This dataset shows the percentage of “For” votes cast for agenda items that received a positive ISS recommendation. Any deviation from 100% occurs when an investor votes against an item despite a supportive ISS recommendation.

• High Alignment: Alignment with “For” recommendations remains exceptionally high across both markets; indeed, the degree of alignment exceeds 99% in twelve instances within the FTSE 100 and in ten cases within the DAX 90.
  Market Comparison: The unweighted average alignment for positive recommendations is slightly higher in the DAX 90 (~98.8%) than in the FTSE 100 (~98.1%).
• Regional Trend: In 11 out of 15 cases, investors show higher alignment with ISS “For” recommendations in the DAX 90 compared to the FTSE 100.

ISS – = Voting –

This dataset shows the percentage of “Against” votes cast for agenda items that received a negative ISS recommendation. Any deviation from 100% occurs when an investor votes for an item despite a negative ISS recommendation.

• Low Alignment: Alignment with “Against” recommendations remains low across both markets.
  Market Comparison: In contrast to the consensus observed regarding positive recommendations, the unweighted average alignment for negative recommendations decreases substantially to approximately 41.5% in the FTSE 100 and 51.5% in the DAX 90. Furthermore, individual alignment levels exhibit significant volatility, descending to a floor of 19.1% within the FTSE 100 and 14.2% within the DAX 90.
• Regional Trend: In 10 out of 15 cases, investors demonstrate a relatively stricter adherence to ISS “Against” recommendations in the German market than in the UK.

Glass Lewis (“GL”) Recommendations Alignment: FTSE 100 & DAX 90

Further illustrations can be found on the heatmaps and bar charts below.

GL + = Voting +

This dataset shows the percentage of “For” votes cast for agenda items that received a positive GL recommendation. Any deviation from 100% occurs when an investor votes against an item despite a supportive GL recommendation.
Strong Alignment : Similar to ISS, alignment with positive GL recommendations remains exceptionally high, with nearly all investors exceeding 90% across both markets.

• Market Comparison: The unweighted average alignment for positive recommendations is slightly higher in the FTSE 100 (~98.3%) compared to the DAX 90 (~96.3%).
• Regional Trend: 10 of 15 investors show a higher alignment with GL “For” recommendations in the FTSE 100 compared to the DAX 90.

GL – = Voting –

This dataset shows the percentage of “Against” votes cast for agenda items that received a negative GL recommendation. Any deviation from 100% occurs when an investor votes against an item despite a supportive GL recommendation.

• Low Alignment: Alignment with “Against” recommendations is notably low across both markets.
• Significant Drop in Alignment: Consistent with the ISS data, the unweighted average alignment for negative recommendations is much lower than for positive ones, at approximately 34.1% in the FTSE 100 and 52.2% in the DAX 90. Furthermore, individual alignment levels exhibit significant volatility, descending to a floor of 16.7% within the FTSE 100 and 29% within the DAX 90.
• Regional Trend: 12 of 15 investors demonstrate a stricter adherence to GL “Against” recommendations in the German market than in the UK.

Interpreting Congruence: Why High Alignment Is Not Proof of Causation

According to a paper by Robert Matthews in 2000 titled “Storks Deliver Babies (p=0.008)”, a highly statistically significant correlation exists between stork populations & human birth rates across Europe.

As the paper showed that a high correlation does not inherently imply causality, the author noted: “While storks may not deliver babies, unthinking interpretation of correlation and p-values can certainly deliver unreliable conclusions.”

Possible Factors Influencing Voting Alignments

• Shared Best Practices: Both investors and proxy advisors frequently operate from the same global governance playbooks. Frameworks established by organizations such as the ICGN, UN PRI, and the OECD, alongside national Corporate Governance Codes, create a common baseline. Consequently, high alignments with positive proxy advisory recommendations might just reflect a shared adherence.
• Feedback Loops: ISS and Glass Lewis conduct comprehensive annual policy surveys and regular client consultations to ensure their benchmarks remain aligned. By considering also this direct input for their guidelines, there might be a certain self-reinforcing cycle.
• Routine Consensus: A certain portion of AGM agendas consist of “routine” and rarely controversial items. In these cases, there is a natural market-wide overlap in positive recommendation & voting, which mathematically inflates alignment percentages.
• Common Perspectives: The high degree of alignment with positive recommendations suggests that proxy advisors mirror an established consensus on basic corporate governance best practices.

Possible Factor Influencing Voting Divergences

• Diverging Perspectives: In contrast, the lower alignment with negative recommendations might indicate that investors’ internal voting guidelines are less rigid and thus frequently support agenda items even when ISS and/or Glass Lewis recommend against them. Consequently, this highlights a clear misalignment between the recommendations of proxy advisors and the independent views and voting policies of individual institutional investors.

Methodology Market Peer Comparison & Index Selection

• Our study examines 15 of the largest international institutional investors, selected based on average investment size and strategic shareholder structures.
• The underlying voting behavior has been curated directly from the investors’ respective public disclosure platforms. This approach ensures that the dataset reflects the official, ex-post records of their stewardship activities, providing a transparent and verifiable basis for our analysis.
• Furthermore, the analysis utilizes original ISS and Glass Lewis recommendation data, deliberately avoiding datasets reconstructed ex-post from the disclosed voting records of investors assumed to have outsourced their voting decisions. Our direct access to primary advisory data ensures that the dataset remains both reliable and comprehensive; consequently, this approach facilitates a high degree of analytical precision by eliminating the risks of secondary data degradation.
• We tracked the correlation of ‘For’ and ‘Against’ votes relative to ISS and Glass Lewis guidance, omitting ‘Abstain’ votes from the scope. Abstentions represent a marginal fraction of the total—never exceeding a 0.01% threshold of votes cast—and are frequently non-existent among the investors in our study.To establish peer groups comparable between the UK and Germany, we opted for the FTSE 100 on the one side, and we aggregated the DAX 40 and MDAX 50 to create a synthetic DAX 90.
• By utilizing this synthetic index, we not only achieved a highly balanced sample sizes for our analysis but also concentrated on the German side to large-cap and mid-cap companies, which better reflects the set-up of the FTSE 100.
• To ensure a consistent baseline for voting guidelines and investor expectations, we excluded companies without full proxy coverage—typically, though not exclusively, due to insufficient free float.
• We also excluded companies incorporated outside the target market to ensure a consistent comparison, as foreign entities may be subject to different regulatory expectations and voting guidelines.
• In total, the analysis covers 167 companies: 85 FTSE 100 companies with 24,535 agenda items (55.8% of total votes) and 82 DAX 90 companies with 19,414 agenda items (44.2% of total votes).