For most companies, navigating say-on-pay has become a reassuring exercise. The strong levels of shareholder support companies logged in recent proxy seasons continued in 2026, despite CEO compensation climbing to record levels, suggesting that investors are broadly satisfied with the alignment between pay and performance.
That broad support, however, can break down quickly at the individual company level.
“At a time when most companies receive shareholder approval well into the 90 percent range, if you’re meaningfully short of that—and many companies still are—that’s going to stand out,” notes Serdar Sikca, principal and head of shareholder advisory at FW Cook. “These headline numbers indicating strong investor support for pay programs don’t mean that investor expectations have relaxed in any way. Special, off-cycle equity grants, outsized severance packages, poor design practices—all of those continue to be scrutinized by shareholders.”
In today’s voting environment, the difference between reaching the threshold for approval versus achieving a strong endorsement matters. Earning an 80 percent approval—a level once viewed as comfortably above the passing threshold—can now be an indication that investors are concerned about certain aspects of the pay program.
Context is also key. A gradual decline over several years—or change of heart by an investor that historically supported the compensation program—may provide an early indication of waning support among investors that needs to be addressed.
Why Engagement Matters More Now
In addition to potentially prompting greater scrutiny of compensation committee decisions and governance practices in the future, weakening say-on-pay support may attract unwanted attention from activist investors. “Beyond an economic thesis, activists look for companies with perceived governance vulnerabilities, including meaningful investor opposition on say-on-pay—and therefore pay-for-performance alignment,” says Sikca. “Compensation concerns are one of the indicators of broader shareholder discontent that activists use as a screen to identify companies where they may have a better chance of winning board seats.”
At the same time, today’s boards lack visibility into how shareholders are evaluating executive pay. Voting reports record shareholders’ reaction to pay decisions but not the reason behind those investor votes. What’s more, while the proxy advisory firms continue to provide research and guidance on say-on-pay votes, many large institutional investors now apply proprietary models developed in-house to evaluate pay programs. Tech-centric competitors are also surfacing, offering AI-powered analytic tools that can be customized to investment firm-specific guidelines.
As a result, direct engagement with large shareholders is becoming one of the only reliable ways to understand evolving expectations and the reasoning behind voting decisions. “As investors increasingly apply bespoke policies to conduct analysis and generate voting recommendations in-house, the notion of proxy advisor recommendations being a clear and transparent indicator of investor sentiment is slowly disappearing,” says Sikca. “That’s driving companies to evolve their shareholder engagement from a periodic exercise during proxy season into a year-round source for board intelligence and opportunity to anticipate voting outcomes and identify emerging governance concerns before they manifest into adverse votes.”
Building an Effective Engagement Practice
Rather than tying investor outreach to proxy voting, particularly in advance of a potentially problematic vote, leading companies view outreach as a recurring exercise aimed at building and maintaining credibility with shareholders, as well as an opportunity for early risk identification. The most effective efforts are both proactive and selective, says Sikca.
“You want to mend the roof while the sun is shining,” he says. “Companies that take corporate hygiene seriously do this exercise at least once a year, every year, no matter what the vote has been at the last annual meeting or what they anticipate for an upcoming vote.”
Engagement meetings typically take place in the off-season, usually in the fourth quarter for December fiscal year-end issuers. That timing allows management and advisers to collect and summarize investor feedback for the board’s subsequent late-year meetings, giving directors an opportunity to consider whether any changes—or additional disclosure—are warranted before the proxy statement is drafted.
Boards should avoid a “boil the ocean” approach, instead focusing on investors with significant voting influence, shareholders that expressed opposition and investors whose policies or concerns are particularly relevant to the company. Engagement team selection is also key. In addition to senior management representatives, independent director(s) should be deployed selectively for the largest institutional holders who value director audience or frequently request board access.
Engagement agendas should be focused but flexible enough to allow investors to raise any concerns, adds Sikca. “I advise my clients to share proposed agendas in advance of the meeting so that companies are driving the dialogue and laying the groundwork for a fruitful two-way conversation rather than putting the onus on the investor,” he says. “This is also an opportunity for messaging on any new developments, whether it’s about compensation, internal succession planning, an external hire or a shift in strategy—the worst thing boards can do is surprise their largest investors with unexpected compensation developments in the proxy statement for the first time.”
Closing the Loop
The next step, distilling investor discussions into a report that identifies recurring themes and highlights issues warranting further consideration, is crucial. In addition to the compensation committee, investor insights and feedback should be shared with and discussed by the full board, although not always acted upon.
“Boards will never be able to check every single box from every single investor meeting,” says Sikca. “That’s impossible—and frankly not expected. But the feedback should be memorialized and shared so directors can discuss whether any action is appropriate.”
While a single outlier may not be cause for concern, multiple long-term shareholders raising the same issue—whether about executive compensation, disclosure, governance practices or succession planning—may suggest a response is worth consideration. Action may range from revisiting a pay program design feature to providing more detailed disclosure around the concern raised in the upcoming proxy season.
Companies should also include a report of their off-season shareholder engagement in the proxy, outlining the scope of their outreach, topics covered and, when appropriate, the actions taken in response to feedback received. Transparency about the board’s deliberative process demonstrates to investors that feedback was considered thoughtfully.
Critically, the process is ongoing. “Once you have this engagement cycle in place and get it institutionalized internally, repeating it year after year, it becomes muscle memory,” says Sikca. “You develop a disciplined, ingrained governance process—engage, analyze, deliberate, disclose, engage again. That robust, consistent process helps the board keep closer tabs on investor sentiment, strengthen governance practices and build trust over time.”
