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Proxy season at a glance
The 2025 proxy season reflected a clear turning point for the investment stewardship of environmental, social and governance (ESG) initiatives. In contrast to the momentum of recent years, this season was characterized by more subdued investor engagement, a sharp decline in shareholder proposal activity and a continued focus on governance fundamentals. Regulatory shifts — particularly the SEC’s revised guidance on shareholder proposals and investor engagement — reshaped the landscape, giving companies more discretion while prompting investors to adjust their proxy voting policies and engagement strategies.
Overall, investors demonstrated strong support for incumbent directors and executive compensation, with average approval levels holding steady or rising.1
1 Unless otherwise sourced, voting data was provided by Proxy Analytics as of June 30, 2025.
Support for directors is stronger than ever
Average support and number of directors failing to receive majority support in the Russell 3000
2021
2022
2023
2024
2025
Source: Data from Proxy Analytics as of June 30, 2025
But beneath the surface, important changes were underway. Some major institutional investors pulled back from proactive engagement during the season, adopting a more cautious and “listen-only” posture in response to the SEC. Shareholder proposals on environmental and social issues fell both in volume and in support — driven by more exclusions, withdrawals and lower relevance — while governance-focused proposals continued to find traction.
That said, though investors have grown more selective about the proposals they support, they continue to expect companies to disclose and address business-relevant sustainability issues in a credible, decision-useful way. This was underscored by the overwhelming rejection of proposals seeking to curtail climate- and human capital-related initiatives, among other topics.
Meanwhile, shareholder activism remained a visible force throughout the season. Activists were more successful this year in winning board seats, driven in part by an increase in settlements that avoided full proxy contests, and most campaigns focused on traditional issues such as operational performance, capital allocation and board accountability.
Taken together, these developments signal a new phase in the dynamic between companies and investors: one in which engagement is more cautious, environmental and social issues are evaluated through a more measured lens, and governance quality remains the anchor of shareholder confidence. This article explores how boards and management teams can respond to these shifts by evolving their engagement strategies, maintaining disclosures that are aligned with investor expectations and taking proactive steps to address governance issues that may attract activist attention in preparation for the 2026 proxy season.
A new era of shareholder engagement
This proxy season marked a structural shift in how large institutional investors engage with public companies and how companies, in turn, should think about building and sustaining those relationships. In response to revised SEC guidance on beneficial ownership reporting, many investors — including those not directly impacted — tended to adopt a more cautious approach to stewardship communications. The new interpretation suggested that large investors who condition their support for directors or other proposals on specific company actions could be classified as active investors under Schedule 13D, rather than remaining as passive investors under 13G. This raised some concern that routine engagement could inadvertently be defined as activist behavior. As a result, engagement that once offered informal feedback and directional insights became far more guarded, with some investors limiting themselves to “listen-only” meetings or pausing outreach entirely during the middle of this year’s proxy season.
This shift disrupted a longstanding cadence of engagement between companies and their largest shareholders, one that often relied on semi-annual touchpoints and gradual relationship-building over time. Stewardship teams, wary of appearing activist-like or overly influential, may now be more deliberate about when and how they engage. For example, some asset managers have shared that they instituted internal guardrails to avoid triggering Schedule 13D filing obligations, fundamentally changing the nature of the dialogue.
What this means for boards. For boards of directors, these changes have real implications, even if many directors haven’t yet felt them firsthand. Of the directors who say members of their board engaged directly with shareholders during the prior year, only 31% report seeing notable changes in engagement with their largest shareholders this past year.2
Moving forward, we expect this to change in meaningful ways. Traditional assumptions about investor feedback loops may no longer hold. Boards may have less insight into how key shareholders are thinking, not just on hot-button issues but on overall company performance and governance direction. This makes it more important than ever to ask management not only what investors are saying but how that feedback is being gathered and what engagement methods are being used.
How boards and management can adapt. This new era of shareholder engagement requires boards to be proactive, flexible and strategic. To meet this moment, boards and management teams should consider the following actions:
- Broaden the definition of engagement. In an environment where there are fewer direct conversations, the pathway to earning long-term investor confidence is now built on the quality and intentionality of interactions as well as on routine meetings. Companies should consider thoughtful participation in third-party forums outside the formal proxy calendar such as conferences, investor roundtables or smaller curated gatherings. These touchpoints may become the foundation for future dialogue.
- Strengthen internal alignment. Establish clear coordination between management, investor relations and the board on engagement objectives. Directors should be regularly briefed not only on what investors are saying but on where the company is — and isn’t — getting meaningful feedback.
- Encourage an offseason strategy. With proxy season now less conducive to deep engagement, the offseason becomes more important. According to our Stewardship investor survey, investors prefer to use offseason discussions for relationship-building. Boards should work with management to prioritize outreach in the fall and early winter, when stewardship teams may be more receptive to dialogue.
- Be intentional with new relationships. Companies should identify long-term shareholders that are not yet engaged and develop targeted strategies for reaching them, especially as traditional repeat interactions become less frequent or less substantive.
2 PwC, 2025 Annual Corporate Directors Survey, Forthcoming.
Sharpening sustainability disclosures in a more complex environment
Although support for many environmental and social shareholder proposals declined in 2025, the notion that these issues are no longer a priority for investors doesn’t hold up to closer examination. Of the 205 environmental and social shareholder proposals that went to a vote in 2025, the 145 proposals seeking to expand activities on topics such as climate risk and human capital earned an average of 15.2% support.
On the other hand, the 60 that sought to curtail these efforts received only 2.3% average support. The overwhelming rejection of these proposals made this clear: investors may be more discerning, but they are not disinterested. These results reflect persistent — if more selective — investor interest in environmental and social performance.
Many companies, however, appear to be delaying their sustainability reports as they take stock of a more fragmented regulatory backdrop and reassess how best to position their disclosures in a way that balances transparency with risk. While caution in this environment is understandable, companies should be mindful not to delay so long that it creates a disclosure vacuum, especially when investors still expect decision-useful information on business-relevant sustainability topics.
What this means for boards. For boards, this recalibration presents both a challenge and an opportunity. On one hand, the path is less clear: the regulatory environment has changed, and companies face more scrutiny from both ESG skeptics and proponents. On the other hand, the fundamentals haven’t changed: investors still want credible information about long-term risks and strategy, and they’re looking to companies to provide it.
Importantly, the board has a role to play in seeing that sustainability disclosures are not just legally compliant but strategically meaningful. When sustainability oversight structures are unclear or related reporting appears disconnected from business performance, it may raise questions about the board’s oversight function.
How boards and management can adapt. A company that maintains strategic, business-relevant sustainability disclosures will be better positioned to meet investor expectations, frame their own narrative and avoid disclosure risks in an increasingly complex environment. Boards and management teams should consider the following actions:
- Refine disclosures to focus on what matters most. Sustainability expectations are maturing but not disappearing. Our Stewardship investor survey results show that over half of investors are dissatisfied or very dissatisfied with how management connects sustainability to the company’s long-term growth. Companies should use this moment to sharpen their disclosures and focus on the sustainability factors most relevant to their business strategy, risk profile and long-term value creation. They should also align disclosures with frameworks on which investors rely (e.g., International Sustainability Standards Board, Task Force on Climate-related Financial Disclosures) so the information provided is decision-useful.
- Avoid disclosure gaps. If you choose to scale back or remove sustainability content, be prepared to explain why. Investors value consistency. A company that scales back transparency without clarification may inadvertently raise red flags about what’s being withheld or lose the opportunity to shape its own narrative in the absence of reliable information.
- Demonstrate clear board oversight. Make sure sustainability governance structures — whether through a committee or full board oversight — are explicitly communicated in investor-facing materials. Over half of directors say their boards have discussed sustainability topics such as talent management, data security, supply chain management, community engagement and climate change at least once over the past year.3 Investors want to see that the board is not just aware of sustainability risks but actively engaged in overseeing them.
3 PwC, 2025 Annual Corporate Directors Survey, Forthcoming.
Exclusions on the rise: how the no-action process is reshaping the dialogue
Midway through proxy season, the SEC amended its prior guidance on shareholder proposals (Rule 14a-8). This made it easier for companies to exclude proposals they viewed as too detailed or not central to the business, tightening the rules after several years of broader shareholder access to the ballot.
This led to a sharp increase in no-action requests and a significant spike in granted exclusions. In 2025, 281 no-action requests were submitted, a 43% increase from 2024. Of those, 189 were granted, a record high. The most common basis? Rule 14a-8(i)(7), which allows exclusion of proposals dealing with “ordinary business,” frequently used to block proposals that boards deemed overly prescriptive or insufficiently tied to financial outcomes.
This shift raises important questions about the future of investor-company dialogue. Shareholder proposals have long served as a key avenue for investors to drive conversation without triggering regulatory concerns about coordination or collusion. With more proposals being excluded and fewer making it to a vote, the onus is on boards and management teams to engage proactively on the sustainability issues that matter most to their investors.
Governance as the anchor
While investor support for environmental and social proposals declined during the 2025 proxy season, governance fundamentals remained important. Shareholder proposals aimed at eliminating supermajority voting provisions, declassifying board structures and expanding shareholder rights continued to gain meaningful traction, with 90% of majority-supported proposals focused on governance.
At the same time, shareholder activism remained a palpable and effective force. Though fewer proxy contests went to a vote and average support for incumbent directors was strong, activists were more successful in winning board seats than the prior year due to a rise in settlements and targeted wins. They also increasingly employed alternative tactics such as withhold campaigns and exempt solicitations to pressure boards without triggering full-blown contests.
Notably, these gains came despite large institutional investors softening their proxy voting guidelines — particularly about board composition — and reportedly continuing to support incumbent directors in most contests. This demonstrates that even without a wholesale change in institutional investor posture, boards that fall short on governance remain vulnerable to sound, persistent pressure from activists.
What this means for boards. These trends are a reminder that upholding strong governance practices isn’t a check-the-box exercise but a credibility signal. Investors continue to scrutinize board structure, leadership, refreshment practices and responsiveness to shareholder input. And when they perceive weaknesses in performance and oversight, they’re more willing to support calls for change, whether through shareholder proposals, withheld votes or activist nominations.
Against this backdrop, boards should prepare for the possibility of more targeted campaigns — not just proxy contests — from well-resourced investors that aim to signal discontent. This season, several of these campaigns led to director resignations or prompted governance changes, even though many of the targeted directors still received just above majority support. In an environment where universal proxy rules empower shareholders to vote director-by-director, the margin for error on demonstrating board quality and accountability has narrowed.
How boards and management can adapt. To stay ahead of investor expectations and mitigate potential governance vulnerabilities, boards and management teams should consider the following actions:
- Review and modernize governance provisions regularly. Reassess charter and bylaw provisions — such as supermajority vote requirements, classified board structures or limitations on shareholder rights — to reflect governance best practices and investor views. As a starting point, review voting results on recent shareholder proposals to identify where investor support is strongest and anticipate where pressure may build next.
- Maintain transparent board evaluation and refreshment practices. Articulate how the board evaluates its own performance, maintains its independence and aligns director skills with company strategy. Activists often target boards that appear stagnant, overly insular or lacking in relevant expertise. A well-executed board assessment process — particularly one that incorporates tools like individual director evaluations and periodic third-party facilitation — can help uncover and address many of the vulnerabilities activists seek to exploit. When done thoughtfully, it also equips the board to confront those concerns directly and credibly in engagement with investors or activist shareholders.
- Be proactive in high-risk scenarios. Earlier this year, we emphasized the importance of understanding how activists pursue their objectives, particularly as they adopt new strategies. We advised companies to anticipate emerging activist scenarios and take steps to strengthen their preparedness. This guidance remains as relevant as ever. As we head into the 2026 proxy season, don’t underestimate the impact of withhold campaigns, exempt solicitations or other nontraditional activist strategies. Of directors who say their boards have conducted tabletop exercises in the last 12 months, only 31% of them have been focused on preparing for an activist investor.4 Boards should engage early, evaluate any gaps in board composition and dedicate sufficient time toward activist campaign readiness.
4 PwC, 2025 Annual Corporate Directors Survey, Forthcoming.
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