Reputational and Regulatory Pressures Loom Large on the 2025 Proxy Season
2025 Proxy Season: Low Support for Shareholder Proposals Isn’t the Full Story
No matter how the data is cut, the 2025 proxy season saw staggeringly low shareholder support for environmental and social shareholder proposals (“E&S proposals”). In the 2025 proxy season:
- Social proposals averaged just 17% support,[1] Environmental proposals averaged 15% support.[2]
- Only one type of E&S shareholder received majority support.[3] Five proposals requesting companies to report on their political contributions and expenditures. All were filed by John Chevedden.
- Institutional Shareholder Services (“ISS”) did not support a single environmental shareholder proposal in calendar year 2025.
- Though BlackRock has yet to disclose how it voted during Q2, when most U.S. annual meetings are held, it supported 0 of 27 E&S proposals in Q1 of 2025.[4]
Average support for E&S proposals has now declined for the fourth year in a row. The low support of these proposals is noteworthy, but not entirely surprising. Company disclosures on E&S topics have generally improved over the past five years, while some proposals have become “overly prescriptive” in the eyes of investors.
But a quantitative analysis of proposals only tells a cursory view of any proxy season, let alone the 2025 proxy season. It’s important to understand the backdrop with which we entered proxy season before looking at the actual numbers.
Instead of simply measuring support levels, the past year may be better measured by assessing the external pressures on investors and proxy advisors and how they have responded.
Regulatory Changes and Other Pressures That Drove the 2025 Proxy Season
- Anti-ESG Sentiment Continues to Grow:
- Multiple right-wing states have criticized institutional investors and proxy advisors for incorporating ESG considerations into investment mandates or their voting decisions and passed legislation targeting Wall Street firms, and particularly the Big Three investors, in more than a dozen states.
- Anti-ESG shareholder proposals are at an all-time high, reflecting increased amounts of funding behind these efforts. While these proposals see de minimus support, the proponents do not file them in search of high investor support. Instead, they file the proposals to have the underlying topics included in a Company’s proxy statement and thus raise a topic to investors’ and other stakeholders’ attention.
- Further, large companies are responding to political and public pressure to revisit their DEI initiatives and disclosures. The most notable form of this pressure was through social media campaigns – which called into question company practices and disclosures – ultimately leading to polarized conversations on social media platforms, unfavorable media coverage, and even consumer boycotts. Robby Starbuck was a particularly prominent voice who led social media campaigns targeting a number of publicly traded companies. In January, Starbuck claimed success for pushing 15 public companies to change or abandon their DEI and LGBTQ policies, a number that has grown since then.
- There’s also been regulatory pressure on DEI initiatives, namely the two executive orders Ending Radical And Wasteful Government DEI Programs And Preferencing and Ending Illegal Discrimination and Restoring Merit-Based Opportunity, which were both signed in January 2025. As part of enforcement efforts, government agencies were tasked with initiating investigations for alleged “discriminatory practices.”
- 13-D/G Rule Change: The SEC announced changes to its Compliance and Disclosure Interpretations regarding 13D/13G filing requirements, which significantly impacted large institutional investors’ behaviors. Under the updated guidance, shareholders must certify that the securities were not acquired and held “for the purpose of or with the effect of changing or influencing the control of the issuer.” Regarding whether a shareholder should file under 13G or 13D, the SEC’s updated guidance states that Schedule 13G may be unavailable to a shareholder who conditions, explicitly or implicitly, its support on management taking a specific action, or states that it will not support the issuer’s nominees absent an underlying change.
- Staff Legal Bulletin No. 14M: The SEC issued new guidance in February that addresses various aspects of the Rule 14-a shareholder proposal process. The new guidance, SLB 14M, clarifies the SEC’s views on the scope of the “economic relevance” and “ordinary business” bases for excluding shareholder proposals under Rule 14a-8, reverting back to guidance that was previously in effect under the first Trump administration.
- Enhanced Regulatory Scrutiny on the “Proxy Advisory Cartel”: Proxy advisory firms ISS and Glass Lewis are facing enhanced scrutiny from critics who argue that their duopoly on providing voting recommendations gives them undue influence over companies. In April, the Financial Services Committee held a hearing on the “Proxy Advisory Cartel” to examine the role and influence of proxy advisory firms. While the hearing itself didn’t result in a specific outcome, it served as a platform to raise concerns. In June, Texas passed a law that will require proxy advisors to make certain disclosures about their voting recommendations for Texas-based corporate issuers if the recommendation relies on nonpecuniary factors, such as ESG topics.
How Investors and Proxy Advisors Have Change Their Models
Investors and proxy advisors regularly evolve their voting policies and other elements of their business model. Over the past year, however, the changes made appear to have larger implications for issuers than in years’ past. Some changes may, at least partially, be designed to respond to or navigate the above pressures.
The most meaningful changes have come from the Big Three investors – Vanguard, Blackrock, and State Street. Changes that these firms have made include the following and are summarized in the table below:
- Softening voting policies: In 2025, the Big Three investors have generally cut back on precise language in their external voting policies.[5],[6], [7] The updated voting policies are much more generic – removing specific thresholds for items like Board diversity. The policies also provide less granularity regarding factors an investor looks at when determining how to vote on certain proposals.
Note: ISS removed its gender and ethnic diversity voting policies from its benchmark research, while Glass Lewis kept its policy in place but now provides investors with disclaimers in red text when one of its research reports issues an adverse recommendation due to Board diversity.
- Temporarily pausing shareholder engagements, and then resuming with new legal disclaimers: Some of these teams paused engagements with portfolio companies when the SEC’s new guidance around 13G eligibility was first released.[8],[9] The firms eventually resumed engagements, but now read disclaimers at the beginning of meetings to reiterate their compliance with the new SEC guidance and clarify that they don’t intend to exert pressure on management or Boards. It has been reported that these teams may be less inclined to seek engagements or discuss certain topics, instead deferring to issuers to set meetings or agendas.
- Fragmentation of stewardship and voting power: The Big Three have created separate stewardship teams and provided “voting choice” to their clients, allowing their clients more customization in how their shares are voted. This will, however, complicate engagement and make it more difficult for issuers to proactively understand where each vote is coming from.
- Creation of separate stewardship teams: Over the past year, each of the Big Three have established separate stewardship teams within their organization.[10],[11],[12] Each team represents different pools of capital, has different voting policies, and has different engagement priorities. Issuers should be prepared for both stewardship teams to show up within one engagement call, or multiple calls for one institutional investor, and make sure to understand how many shares outstanding each team represents.
- Voting choice: Voting choice is a program where an asset manager allows its underlying clients to decide how their shares are voted. Clients can typically choose to vote with the stewardship team, vote with management, vote in line with proxy advisor policies, or sometimes cast their own customized votes. The Big Three continue to expand the voting choice options and offer it more clients, which provides their clients with more flexibility. For issuers, it may only further obfuscate where votes are coming from.[13], [14], [15]
Graphic created by FTI Consulting (July 2025)
Looking Ahead – How Companies Should Adapt and the Importance of Offseason Engagement
Given these circumstances, and particularly the guidance on 13G, offseason engagement is now more complicated and more important than it has been before. It is more complicated because of the changes above.
It is more important because engaging with investors during proxy season is closely associated with specific items on the ballot, which can lead to investors being reluctant to provide candid feedback given the higher risks that feedback can be interpreted as a condition of a vote. This was particularly true during contested elections in the 2025 proxy season, where some investors were particularly close-lipped in engagements. But in offseason engagement, where there is no ballot to vote on, investors may feel somewhat more comfortable providing open feedback.
Preparing for offseason meetings, especially, will become trickier and more important for issuers. While investors previously often requested meetings, weighed in on agendas, or asked specific questions, they may take a back footed approach this offseason. That means issuers, without a crystal ball, should proactively set an agenda and pick topics that are (or will be) most crucial to maintaining investor support next proxy season. Effectively doing this requires an unfiltered assessment of a company’s own governance and business profile, but also a very keen understanding of how each investor may assess specific topics.
In engagements with investors, issuers should aim to strike a challenging balance between proactively seeking feedback on specific topics and asking investors questions in an open-ended way that invites them to provide decision-useful feedback.
Offseason engagements may be challenging this year – for a whole variety of reasons – but approaching these meetings thoughtfully and thoroughly will be the key to a successful 2026 annual meeting.
References
[1] Data Sourced from ISS. NPX Year defined as July 1 to June 30.
[2] Id.
[3] Id.
[4] “Investment Stewardship by the Numbers: Q1 2025,” BlackRock (2025), https://www.blackrock.com/corporate/literature/publication/investment-stewardship-by-the-numbers-q1-2025.pdf
[5] “Proxy Voting Policy for U.S. Portfolio Companies,” Vanguard (effective February 1, 2025), https://corporate.vanguard.com/content/dam/corp/advocate/investment-stewardship/pdf/policies-and-reports/us_proxy_voting_policy_2025.pdf
[6] “U.S. Responsible Investment Guidelines,” BlackRock (2025), https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible‑investment‑guidelines‑us.pdf
[7] “Global Proxy Voting and Engagement Policy,” State Street (March 2025), https://www.ssga.com/library-content/assets/pdf/global/asset-stewardship/proxy-voting-and-engagement-policy.pdf
[8] “BlackRock pauses corporate meetings in wake of new ESG rules,” Reuters (February 18, 2025), https://www.reuters.com/sustainability/blackrock-pauses-corporate-meetings-wake-new-esg-rules-2025-02-18/
[9] “Vanguard pauses corporate meetings over new ESG guidance,” Reuters (February 19, 2025), https://www.reuters.com/business/finance/vanguard-pauses-corporate-meetings-over-new-esg-guidance-2025-02-19/
[10] “Annual Stewardship Report 2024,” BlackRock (2024), https://www.blackrock.com/corporate/literature/publication/annual-stewardship-report-2024.pdf
[11] “An Update on Our U.S. Investment Advisory Structure,” Vanguard (June 18, 2025), https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/update-on-our-us-investment-advisory-structure.html
[12] “State Street Launches Sustainability Engagement and Voting Service,” ESG Today (2025), https://www.esgtoday.com/state-street-launches-sustainability-engagement-and-voting-service/
[13] “Vanguard Investor Choice Nears 10 Million Investors,” Vanguard (May 29, 2025), https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/vanguard-investor-choice-nears-10-million-investors.html
[14] “BlackRock Voting Choice,” BlackRock (2024), https://www.blackrock.com/corporate/about-us/investment-stewardship/blackrock-voting-choice
[15] “State Street Global Advisors Sees Strong and Growing Market Adoption of Proxy Voting Choice in Q1 2025,” State Street (April 2025), https://investors.statestreet.com/investor-news-events/press-releases/news-details/2025/State-Street-Global-Advisors-Sees-Strong-and-Growing-Market-Adoption-of-Proxy-Voting-Choice-in-Q1-2025/default.aspx
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