For more than a decade, corporate governance in U.S. public markets relied on an implicit coordination mechanism. A small group of large asset managers — most notably BlackRock, Vanguard, and State Street — combined with proxy advisory firms such as ISS and Glass Lewis, exercised centralized stewardship through benchmark voting policies and consolidated stewardship teams (Bebchuk & Hirst, 2019; Wang, 2026).
This system created predictability: boards knew how votes would likely fall, investors could scale decisions, and fiduciary responsibility was implicitly shared across intermediaries (OECD, 2025).

That system has now broken down.

As Chen Wang shows in his 2026 Berkeley Law research paper, corporate governance is undergoing a structural transition from unified institutional stewardship to fragmented governance, a regime in which voting authority, analytical judgment, and fiduciary responsibility are deliberately dispersed across heterogeneous investor preferences, decentralized stewardship structures, and non-uniform proxy voting rules (Wang, 2026). This shift is not ideological; it is structural and driven by political pressure, regulatory scrutiny, and scale constraints (Wang, 2026).

One immediate consequence is the collapse of automatic delegation to proxy advisers. For years, institutional investors relied on proxy adviser benchmark recommendations as a practical and fiduciary safeguard, particularly in index investing and diversified portfolios (Bebchuk & Hirst, 2019; OECD, 2025). Following proxy benchmarks reduced governance complexity and provided implicit legal cover. That cover is now gone (Wang, 2026).

On December 11, 2025, the U.S. administration issued the Executive Order Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors, directing federal agencies to increase scrutiny of proxy advisory firms and explicitly questioning the legitimacy of standardized, politically influenced voting recommendations (Executive Office of the President, 2025a). From 2026 onward, mechanically following proxy adviser recommendations creates fiduciary and regulatory risk (Winston & Strawn, 2026; K&L Gates, 2026).

At the same time, proxy advisers themselves have retreated from one-size-fits-all benchmark policies, replacing them with case-by-case assessments and multiple analytical perspectives (Wang, 2026). Every significant vote must now be defensible ex post as an independent, financially grounded decision (Wang, 2026).

A second structural change is the deliberate fragmentation of stewardship functions within the largest asset managers. Beginning in 2025 and accelerating into 2026, BlackRock, Vanguard, and State Street each restructured their stewardship operations, separating voting authority across mandates and product lines (Wang, 2026). There is no longer a single, predictable “Big Three vote.”

Guidance for the 2026 proxy season confirms that voting-choice and pass-through programs have reduced predictability in proxy outcomes and altered engagement dynamics (Harvard Law School Forum on Corporate Governance, 2026). For boards and CEOs, this means fewer clear signals and more heterogeneous shareholder reactions.

This fragmentation is not about democratization. It is about legal risk containment. Regulators are increasingly questioning whether coordinated voting by large asset managers could constitute “acting in concert,” triggering disclosure and antitrust exposure (K&L Gates, 2026; Wang, 2026).Fragmentation is therefore a defensive strategy, not a philosophical shift (Wang, 2026).

These changes are occurring against a backdrop of extreme concentration. Collectively, the Big Three manage tens of trillions of dollars and often control 20–30% of the voting power in large U.S. corporations (Bebchuk & Hirst, 2019; Wang, 2026). At the same time, ISS and Glass Lewis together account for roughly 90% of the proxy advisory market, giving them disproportionate agenda-setting power despite not voting shares themselves (Congress Research Service, 2025). Even in fragmentation, power remains concentrated — but coordination is weaker.

For corporations, this fundamentally changes governance strategy. Under unified stewardship, aligning disclosures with proxy adviser benchmarks increased the likelihood of favorable outcomes (Bebchuk & Hirst, 2019).In fragmented governance, optimizing for a single proxy framework no longer works (Wang, 2026).

For institutional investors, fragmentation creates a new monitoring challenge. Even as voting authority is dispersed, asset managers remain fiduciaries for the vast majority of capital because participation in pass-through voting remains low (Wang, 2026). Responsibility does not fragment just because voting does.

Effective oversight therefore requires meta-governance: tracking participation rates, policy selections, and outcome dispersion across beneficiaries while retaining accountability for non-participating assets (Wang, 2026). Institutions must invest in internal dashboards, audit trails, and escalation mechanisms to prevent fragmentation from becoming abdication (OECD, 2025; Harvard Law School Forum on Corporate Governance, 2026).

Fragmentation is often framed as empowerment. The evidence suggests otherwise. Participation remains limited, information asymmetries persist, and governance capacity concentrates among actors with the resources to internalize stewardship (OECD, 2025; Wang, 2026). As coordination weakens, management often benefits by default (Wang, 2026).

The defining reality of 2026 is not renewed activism but defensive stewardship. Institutional investors are prioritizing legal resilience, documentation, and financial materiality over normative signaling (Wang, 2026; Winston & Strawn, 2026).

The era of unified stewardship is over. Fragmented governance better reflects political and market realities, but without new internal governance infrastructure, it risks weakening accountability rather than strengthening democracy (Wang, 2026).

For CEOs and boards, the message is clear: you can no longer manage governance by proxy — you must manage it directly.

References
Bebchuk, L. A., & Hirst, S. (2019). The specter of the giant three. Boston University Law Review, 99(3), 721–741.

Congress Research Service. (2025). Proxy advisor regulation: Recent litigation, state law developments, and federal oversight.

Executive Office of the President. (2025a, December 11). Protecting American investors from foreign-owned and politically-motivated proxy advisors (Executive Order). https://www.whitehouse.gov/presidential-actions/2025/12/protecting-american-investors-from-foreign-owned-and-politically-motivated-proxy-advisors/

Executive Office of the President. (2025b, December 11). Fact sheet: President Donald J. Trump protects American investors from foreign-owned and politically-motivated proxy advisors. https://www.whitehouse.gov/fact-sheets/2025/12/fact-sheet-president-donald-j-trump-protects-american-investors-from-foreign-owned-and-politically-motivated-proxy-advisors/
Federal Trade Commission, & U.S. Department of Justice. (2025). Statement of interest on institutional investor coordination and antitrust risk.

Harvard Law School Forum on Corporate Governance. (2026, January 30). Key considerations for the 2026 proxy season. https://corpgov.law.harvard.edu/2026/01/30/key-considerations-for-the-2026-proxy-season/

K&L Gates. (2026, January 29). Proxy wars. https://www.klgates.com/Proxy-Wars-1-29-2026

OECD. (2025). Institutional investor engagement and stewardship (Vol. 10). OECD Publishing.

Wang, C. (2026). The end of unified stewardship and the rise of fragmented governance (UC Berkeley Public Law and Legal Theory Research Paper Series). SSRN. https://ssrn.com/abstract=6114447

Winston & Strawn. (2026, January 29). New executive order targets proxy advisory firms. https://www.winston.com/en/blogs-and-podcasts/benefits-blast/new-executive-order-targets-proxy-advisory-firms