Against the backdrop of a stagnating economy, Occupy Wall Street protests, and a presidential election, 2012 has all the makings of a highly-charged proxy season. However, corporate pre-season actions, including increased shareholder engagement, governance and compensation reforms, and no-action challenges, are softening the polemic and lightening the load of shareholder proposals.With a year of votes behind us, this year’s say on pay (SOP) should bring fewer surprises or reprises of eleventh-hour tweaks and annotations to compensation programs. Surveys by compensation consultants indicate that most companies are simplifying their CD&As, and many are reevaluating tie-ins between pay and performance and eliminating problematic pay practices. These efforts are borne out by initial 2012 SOP votes, which have improved significantly at companies that received low support levels last year.The most closely watched issue this season, proxy access, may ultimately make only a minor showing on ballots as a result of settlements and no-action challenges. While institutional proponents are being judicious in their targeting and reaching compromises with issuers, retail activists seeking a homogenized “proxy access for the 99%” may well see their efforts shot down at the SEC. The season’s other major new shareholder campaign, on audit firm rotation, was upended early on by the SEC, though a downsized proposal will appear at later-year annual meetings.The season will still be replete with mainstay shareholder proposals on board declassification, majority voting in director elections and the repeal of supermajority voting, which are generally easy wins because of their broad acceptance within the investor community. Less easy wins will be further reforms aimed at easing shareholders’ ability to call special meetings or act by written consent, which saw weakening support levels last year. In either case, issuers will have a harder time implementing these reforms due to changes in New York Stock Exchange (NYSE) rules which now prohibit uninstructed broker voting on corporate governance proposals. Companies may also be forced to retreat from exclusive forum provisions in the face of shareholder lawsuits and the prospect of negative proxy advisor opinions.Among all proxy season topics, corporate lobbying and campaign finance will generate the greatest dissonance at annual meetings, where a raft of proposals sponsored by union and social activists will be chorused by Occupy the Boardroom protests. Understandably, the stakes are high in this year’s elections. A Republican presidential win will usher in a rollback of burgeoning regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and stem the progress of activist agendas, which have been embraced by the Obama Administration.In short, 2012 may not prove to be the most momentous proxy season on record, but it will still present its share of challenges for issuers. This newsletter covers some of the top issues and trends to watch.