2026 Proxy Season Update: Key Regulatory and Market Developments

Overview 

As public companies prepare for the 2026 proxy and annual reporting season, significant regulatory and market developments are shaping disclosure practices, governance and investor engagement. This update summarizes recent Securities and Exchange Commission (SEC) rulemaking priorities, evolving disclosure requirements, executive compensation trends, proxy advisory firm policy changes, and other critical issues impacting public company reporting and governance. 

SEC Rulemaking Priorities and Regulatory Shifts 

The SEC, under new leadership, has reprioritized its regulatory agenda, signaling a more issuer-friendly and deregulatory approach. The SEC’s Spring 2025 Reg Flex Agenda emphasizes:

• Reducing reporting and disclosure requirements, including potential movement from quarterly to semi-annual reporting;
• Restricting shareholder proposals;
• Streamlining access to capital and expanding accommodations for emerging growth companies; and
• A marked shift away from ESG-related rulemaking, with the removal of numerous items related to human capital management, board diversity and resource extraction disclosures.

The SEC’s focus on cryptoassets is notable, with over 20% of current rule proposals addressing crypto assets and related regulatory reforms. Additionally, certain Dodd-Frank-mandated rulemakings, such as incentive-based compensation at certain large financial institutions, have been deferred to the  long-term agenda. 

Quarterly vs. Semi-Annual Reporting 

The SEC is considering issuing a rule proposal to allow companies to opt for semi-annual (rather than quarterly) reporting, reviving a concept previously discussed but abandoned in 2021. Proponents argue this would foster a longer-term management perspective and reduce compliance costs, while opponents cite concerns over reduced transparency and potential inconsistencies in disclosure. Any change is unlikely to be effective before 2027. 

Tailored Risk Factor Disclosures 

The SEC continues to emphasize the importance of company-specific, tailored risk factor disclosures in annual reports, discouraging generic or “kitchen sink” approaches. Key risk areas for consideration in 2026 include:

• Artificial intelligence (AI): Companies should clearly define and contextualize AI-related risks, avoiding both overstatement and understatement (so-called “AI washing”).
• Digital assets and cybersecurity: Heightened SEC scrutiny requires robust disclosure of management’s expertise, third-party involvement and board oversight in these areas.
• Geopolitical risks, economic volatility and NASDAQ compliance: Recent NASDAQ rule amendments have streamlined delisting procedures for non-compliance with minimum price requirements, increasing the importance of related risk disclosures. 

Climate Change and DEI Disclosures 

While the volume of climate change-related disclosures has remained steady, the nature of such disclosures has shifted, with fewer companies making comprehensive emissions or net zero commitments. Pending litigation has placed SEC climate rules in abeyance, but companies must remain mindful of state, European Union and industry-specific reporting obligations. 

Diversity, equity and inclusion (DEI) disclosures have declined sharply, with only 34 percent of S&P 500 companies referencing DEI in their most recent 10-Ks, down from 90 percent in 2024. However, broader workforce and board effectiveness disclosures remain prevalent, reflecting evolving investor and regulatory expectations. 

Shareholder Proposals and Proxy Process 

For the 2026 proxy season, the SEC staff will generally not provide responses to no-action requests regarding the exclusion of shareholder proposals under Rule 14a-8, except where a company seeks to exclude the proposal under Rule 14a-8(i)(1) (which permits companies to exclude a shareholder proposal if the proposal is not a proper subject for action by shareholders under applicable state law). Companies must continue to comply with Rule 14a-8(j)’s requirement to provide information-only notices and may seek to exclude a proposal under Rule 14a-8(i)(1) with a supporting legal opinion. The SEC Chairman has also questioned the requirement to include non-binding shareholder proposals in company proxies under Delaware law, potentially opening the door to broader exclusions pending further guidance or court decisions. 

Smaller Reporting Company Status 

Recent SEC guidance clarifies that companies losing smaller reporting company (SRC) status under the revenue test may continue to benefit from extended filing deadlines and a one-year deferral of auditor attestation requirements, providing transitional relief. 

Executive Compensation Trends 

The SEC is reviewing the complexity and materiality of current executive compensation disclosure rules, with broad consensus that simplification is needed, though significant changes are unlikely to take effect in time for the 2026 proxy and annual reporting season. Key trends include:

• There is an increased focus on executive security as a perquisite requiring disclosure, following high-profile incidents.
• New SEC guidance narrowed the definition of passive investors for Schedule 13D purposes, impacting institutional investor engagement.
• Compensation committees are reassessing incentive plans in light of tariffs and market volatility, with a focus on flexibility and readiness for adjustments.
• Proxy advisors are recalibrating their approaches to board diversity and compensation, with ISS eliminating diversity from voting recommendations and Glass Lewis emphasizing cognitive diversity and transparency. 

Proxy Advisory Firm Policy Updates 

ISS and Glass Lewis have both updated their executive compensation evaluation frameworks:

• ISS has extended the time horizon for pay-for-performance assessments and will view longer vesting periods more favorably. Immediate adverse recommendations may be issued for problematic non-employee director pay, and new factors have been added to the equity plan scorecard.
• Glass Lewis is transitioning to a numerical scoring system for pay-for-performance and expanding the range of quantitative tests. Beginning in 2027, Glass Lewis will issue four distinct proxy research reports tailored to different investor audiences, though the impact on voting outcomes is expected to be limited. 

SEC Accounting and Financial Reporting Developments 

The SEC has issued fewer comment letters in 2025, but scrutiny of MD&A, non-GAAP measures, segment reporting and revenue recognition remained high. Companies should ensure detailed, company-specific disclosures, particularly regarding period-to-period changes, liquidity and critical accounting estimates. 

Recent FASB updates include:

• ASU 2025-6: Modernizes accounting for internal use software, requiring capitalization only when management authorizes and funds the project and completion is probable.
• ASU 2025-7: Expands scope exceptions for derivatives and clarifies accounting for share-based, non-cash consideration, simplifying reporting for certain contracts.

Conclusion

The 2026 proxy season arrives in connection with a strong deregulatory shift at the SEC, evolving disclosure expectations, and significant changes in the proxy advisory landscape. Public companies should prioritize tailored, material disclosures, monitor ongoing regulatory developments and engage in proactive planning to address emerging risks and investor expectations.

Katten advises public companies, boards of directors, and executive leadership teams across all aspects of the proxy and annual reporting process. Our multidisciplinary team supports clients with SEC reporting and disclosure strategy, shareholder engagement and activism preparedness, executive compensation and governance matters, proxy statement drafting and review, and navigating evolving SEC, FASB and proxy advisory firm requirements. We also work closely with compensation committees, in-house legal teams, and investor relations professionals to anticipate regulatory shifts and manage risk proactively. For questions regarding the 2026 proxy season or to discuss how these developments may impact your company, please contact your regular Katten attorney or any member of our Capital Markets team at Katten.