The annual shareholder proposal season often serves as a useful barometer of investor priorities, corporate governance trends, and emerging areas of potential D&O risk. This year, however, the proxy season also provided a glimpse into what may become a fundamentally different shareholder activism landscape.

On June 5, 2026, the Cooley law firm published its 2026 Shareholder Proposal Season Early Review and Look Ahead to 2027 (Cooley Report).  The report provided a mid-season review of 2026 shareholder proposals, showing, in part, that proposal activity continued several trends that have been developing over the last several years, including declining environmental and social proposal volume and continued steady support for governance-related proposals.

But Cooley’s most significant observations may have less to do with proposal outcomes than with procedural and regulatory changes. The report suggests that a combination of SEC policy changes, increased litigation, and evolving activist tactics could result in a more adversarial environment for companies and their directors in the years ahead. The following discusses certain Cooley Report findings and potential impact to D&O exposure.

The 2026 Proxy Season

The most significant backdrop to this year’s proxy season was the SEC staff’s November 2025 announcement that it would largely cease issuing substantive responses to Rule 14a-8 no-action requests. Historically, companies seeking to exclude shareholder proposals from proxy materials often sought no-action relief from the SEC staff, which effectively acted as an informal arbiter of proposal disputes. Under the staff’s revised approach, companies may still seek to exclude proposals, but they do so without the same degree of regulatory guidance and certainty.

Despite concerns that the SEC’s withdrawal from the process would dramatically alter proposal outcomes, the Cooley Report found that overall proposal trends remained remarkably consistent with recent years. Total proposal volume declined year-over-year, driven largely by reductions in environmental and social proposals. Governance proposals remained steady and continued to receive the strongest shareholder support.

Among the most notable developments were significant increases in proposals seeking independent board chairs, expanded shareholder written-consent rights, and enhanced special meeting rights. Several governance proposals achieved majority support during the season, including proposals seeking elimination of supermajority voting provisions and expansion of shareholder rights.

By contrast, environmental and social (ESG) proposals continued to decline both in volume and, generally, in shareholder support. While climate-related and environmental proposals remain a significant feature of the governance landscape, investor enthusiasm for many traditional ESG initiatives appears to have moderated considerably compared to the levels seen several years ago. 

The report also notes an emerging category that may become increasingly important in future proxy seasons: artificial intelligence. AI-related shareholder proposals increased during 2026, reflecting growing investor interest in board oversight, governance, risk management, and disclosure practices surrounding AI deployment and use.

We have discussed both the shift in D&O risk stemming from corporate ESG initiatives and fragmented state and international regulation on The D&O Diary.  We have similarly chronicled how AI disclosures are becoming a focal point for shareholders and securities plaintiffs.

The Shift from Proposals to Litigation

From a D&O liability perspective, perhaps the most significant finding in the report involves the growing role of litigation in shareholder proposal disputes.

The Cooley report notes that six lawsuits were filed during the 2026 proxy season challenging company decisions to exclude shareholder proposals. While that number may appear modest, it represents a meaningful shift in which several of the lawsuits resulted in settlements or court rulings requiring companies to include previously excluded proposals in their proxy materials.

For directors and officers, this development is noteworthy because it creates a new source of governance-related litigation risk. Decisions regarding proposal exclusions may become subject to judicial review, which could increase defense expenses and result in additional opportunities for activists to challenge board decisions.

Activists Are Increasingly Targeting Directors

Another important observation in the Cooley Report for D&O underwriters to consider is that shareholder proponents are increasingly experimenting with tactics that focus directly on directors rather than on proposals alone.

The report identifies several emerging strategies, including litigation challenging proposal exclusions; “zero-slate” campaigns conducted outside the traditional Rule 14a-8 framework; withhold campaigns targeting directors; public pressure campaigns; and efforts to advance binding bylaw amendments.

These developments suggest that activists may increasingly view director elections and board composition as more effective tools than shareholder proposals themselves. If that trend continues, directors could find themselves becoming the primary targets of shareholder dissatisfaction, particularly in connection with controversial governance, ESG, political spending, AI oversight, or disclosure issues.

For D&O insurers, this shift may prove significant. Campaigns focused directly on directors can increase the likelihood of books-and-records demands, derivative litigation, fiduciary-duty claims, and election-related disputes.  All of which have the potential to impact Side A coverage and impair D&O policy limits.

Looking Ahead to 2027

The report concludes by noting that the SEC continues to consider broader revisions to Rule 14a-8, including the possibility of substantial reform or even repeal. While any such effort could face significant legal and procedural challenges, the prospect alone is already influencing shareholder and activist behavior.

Ironically, reducing the availability of shareholder proposals may not reduce shareholder activism. Instead, it may simply redirect activist energy into litigation, proxy contests, director-election campaigns, and other forms of pressure that are potentially more disruptive and costly than traditional shareholder proposals.

That possibility represents the most significant D&O exposure takeaway from this year’s proxy season. For boards and their advisors, the key lesson may be that the traditional shareholder proposal process, which has long served as a pressure-release valve within the corporate governance system, has shifted to a more litigation-oriented and director-focused form of activism.

As a result, the most important story from the 2026 proxy season may be the emerging evidence that the next generation of shareholder activism is likely to be fought less through proxy statements and more through courts, director elections, and governance battles that strike at the heart of board oversight itself.