What happened: The SEC has proposed rescinding Rule 14a-8, the 1934-era rule requiring public companies to include shareholder proposals in their proxy statements. Paired with it is an amendment to Rule 14a-4(c) expanding companies’ discretionary voting authority, plus a separate release modernizing proxy solicitation for digital communications.
The mechanics: This caps an 18-month retreat from involvement in shareholder proposals. The SEC stopped issuing no-action letters on exclusion requests in November 2025 and has defended that decision all along – and now the Commission wants out of the shareholder-proposal business entirely.
Chair Atkins’ argument: nothing in the Exchange Act gives the SEC authority to dictate which topics get a shareholder vote. That’s a state law question, he says, and always should have been: “the question of whether…shareholders have a right to present a matter for other shareholders to vote on—is distinct and is determined by State law or, if permitted by State law, a company’s governing documents.”
What happens now: Rescission of the rule means that whether a proposal gets a vote becomes a function of state corporate law, company bylaws, and board discretion, none of which currently has a substitute framework built out.
- Floor proposals under state law. Most state corporate statutes already give shareholders a right to raise “other proper business” at the annual meeting. Without 14a-8, a proponent goes back to that baseline right, subject to whatever advance-notice bylaw the company has on the books (deadline, ownership threshold, disclosure requirements).
- Getting it onto the company’s proxy card. This is where Rule 14a-4(c) comes in. If a proponent gives timely notice of intent to raise a floor proposal, then files and distributes its own proxy statement to holders of enough shares to actually carry the vote, the company has to include that proposal as a separate item on its own card. So the issue shifts from “will this proposal survive an SEC exclusion request” to “can the proponent afford its own solicitation."
- The state law gap. Because Rule 14a-8 has been the operative framework for so long, state law on what counts as a “proper subject” for a binding or precatory proposal is thin, and Delaware in particular hasn’t settled it.
- Since there will be no federal floor, other states can do what they want –we could wind up with totally opposite shareholder proposal rules in every state.
- This could make director elections and say-on-pay votes much more contentious, as well as invite lawsuits from disenfranchised activists.
The workaround: proposal access bylaws. Some companies are expected to voluntarily write their own version of 14a-8 into their bylaws, borrowing the proxy-access-bylaw model from director nominations. That gives boards control, rather than the SEC’s one-size-fits-all version, but it also means every company sets its own rules, so there’s no consistency across proxy season for investors to rely on.
Investor backlash is already organized. Ceres, ICCR, US SIF and the Shareholder Rights Group earlier filed petitions with the SEC to retain rule 14a-8 and are promising a “vigorous” response. CII vowed to “speak publicly and repeatedly to defend Rule 14a-8.” It is likely the investor response will be significant.
What’s next. While we are all busy filing comments for this rule, it’s very possible the other major proposal at OIRA (Office of Information and Regulatory Affairs) will be approved – on reduction of exec comp disclosures. Stay tuned!
