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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 229, 232, 240 and 249

[Release No. 34-106383; File No. S7-2026-32]

RIN 3235-AN47

Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals and Amendments

to Rule 14a-4

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing to

rescind Rule 14a-8 under the Securities Exchange Act of 1934 (“Exchange Act”) and leave

determinations about the role of shareholder proposals to State law and company governing

documents. The Commission also is proposing to amend Rule 14a-4 under the Exchange Act to

expand the circumstances under which a company may exercise, with respect to proxies it

receives, discretionary voting authority on proposals that will be presented at a shareholder

meeting but not included in the company’s proxy materials. At the same time, the proposed

amendments to Rule 14a-4 would provide shareholders with the means to elect to prevent the

company from exercising such authority with respect to their individual shares.

DATES: This release was published in the Federal Register on September 21, 2026. Comments

should be received on or before November 20, 2026.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments:

•

Use the Commission’s internet comment form (https://www.sec.gov/comments/s7-202632/rescission-rule-14a-8s-federal-regulation-shareholder-proposals-amendments-rule14a-4).

•

Send an email to rule-comments@sec.gov. Please include File Number S7-2026-32 on

the subject line.

Paper Comments:

•

Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-2026-32. This file number should be

included on the subject line if email is used. To help the Commission process and review your

comments more efficiently, please use only one method of submission. The Commission will

post all submitted comments on the Commission’s website (https://www.sec.gov/rulesregulations/public-comments/s7-2026-32). Do not include personally identifiable information in

submissions; you should submit only information that you wish to make available publicly. The

Commission may redact in part or withhold entirely from publication submitted material that is

obscene or subject to copyright protection.

Studies, memoranda, or other substantive items may be added by the Commission or

staff to the comment file during this rulemaking. A notification of the inclusion in the comment

file of any such materials will be made available on the Commission’s website. To ensure direct

electronic receipt of such notifications, sign up through the “Stay Connected” option at

www.sec.gov to receive notifications by email.

A summary of the proposal of not more than 100 words is posted on the Commission’s

website (https://www.sec.gov/rules-regulations/2026/09/s7-2026-32).

FOR FURTHER INFORMATION CONTACT: Jenny J. Choi, Special Counsel, or Matt

McNair, Senior Adviser to the Chief Counsel, Office of Chief Counsel, at (202) 551-3500,

David M. Plattner, Special Counsel, or Blake M. Grady, Special Counsel, Office of Mergers and

Acquisitions, at (202) 551-3440, Division of Corporation Finance, U.S. Securities and

Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing to rescind 17 CFR

240.14a-8 (“Rule 14a-8”) and amend the following rules and forms:

Commission Reference

Organization; Conduct and Ethics; and Information

Requests

Regulation S-K

Item 407 of

Regulation S-K

Regulation S-T 2

Rule 101 of

Regulation S-T

Securities Exchange Act of 1934

Rule 14a-2

(“Exchange Act”) 3

Rule 14a-4

Rule 14a-5

Rule 14a-6

Rule 14c-5

Schedule 14C

Form 8-K

17 CFR 229.10 through 229.1610.

17 CFR 232.10 through 232.501.

15 U.S.C. 78a et seq.

CFR Citation

(17 CFR)

§ 200.30-1

§ 200.82

§ 229.407

§ 232.101

§ 240.14a-2

§ 240.14a-4

§ 240.14a-5

§ 240.14a-6

§ 240.14c-5

§ 240.14c-101

§ 249.308

TABLE OF CONTENTS

INTRODUCTION .................................................................................................................7

II. DISCUSSION OF PROPOSED AMENDMENTS...........................................................13

A. Proposed Rescission of Rule 14a-8 ..................................................................................13

Rule 14a-8 Exceeds the Commission’s Statutory Authority .........................................13

Policy Reasons for Rescinding Rule 14a-8 ...................................................................35

Investment Company Considerations ............................................................................55

B. Proposed Amendments to Rule 14a-4(c)..........................................................................61

Overview of Current Rules Related to Discretionary Voting Authority .......................61

Historical Background ...................................................................................................65

Proposed Rule Amendments..........................................................................................68

C. Other Proposed Amendments ...........................................................................................79

D. General Request for Comment .........................................................................................88

III. OTHER MATTERS ...........................................................................................................88

IV. ECONOMIC ANALYSIS...................................................................................................89

A. Introduction ......................................................................................................................89

B. Baseline ............................................................................................................................90

Current Regulatory Framework .....................................................................................90

Affected Parties .............................................................................................................94

Current Practices ............................................................................................................99

C. Benefits and Costs ..........................................................................................................118

Proposed Rescission of Rule 14a-8 .............................................................................119

Proposed Amendments to Rule 14a-4(c) .....................................................................148

The Benefits and Costs for Proxy-Related Service Providers .....................................174

Aggregate Monetized Benefits and Costs....................................................................175

D. Effects on Efficiency, Competition, and Capital Formation ..........................................181

Efficiency .....................................................................................................................181

Competition .................................................................................................................188

Capital Formation ........................................................................................................191

E. Reasonable Alternatives .................................................................................................194

Alternative to Rescinding Rule 14a-8..........................................................................194

Switch the default choice of check box in proposed Rule 14a-4(c)(2) amendment ....196

Require a separate check box for each proposal ..........................................................197

F. Request for Comment .....................................................................................................198

V. PAPERWORK REDUCTION ACT ...............................................................................200

A. Summary of the Collection of Information ....................................................................200

B. Estimated Paperwork Burden Effects of the Proposed Amendments ............................201

C. Incremental and Aggregate Burden and Cost Estimates for the Proposed Amendments

203

D. Request for Comment .....................................................................................................206

VI. CONGRESSIONAL REVIEW ACT ..............................................................................207

VII. INITIAL REGULATORY FLEXIBILITY ACT ANALYSIS .....................................208

A. Reasons for, and Objectives of, the Proposed Action ....................................................208

B. Legal Basis .....................................................................................................................209

C. Small Entities Subject to the Proposed Amendments ....................................................209

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements ................211

E. Duplicative, Overlapping, or Conflicting Federal Rules ................................................212

F. Significant Alternatives ..................................................................................................212

G. Request for Comment .....................................................................................................214

STATUTORY AUTHORITY .................................................................................................215

INTRODUCTION

“Corporations are creatures of state law.” 4 Because “regulation of corporate governance

is regulation of entities whose very existence and attributes are a product of state law,” “[n]o

principle of corporation law and practice is more firmly established than a State’s authority to

regulate domestic corporations, including the authority to define the voting rights of

shareholders.” 5 Shareholder voting rights are generally exercised at shareholder meetings,

where proposals are put before the shareholders for a vote. 6 The conduct of shareholder

meetings, including how proposals are presented, is governed by State law. 7

The manner in which shareholders exercise their rights to vote at shareholder meetings

has evolved over time. Historically, shareholders exercised their rights by attending the

shareholder meeting and voting in person. However, the development of large corporations with

widely dispersed shareholders led to the rise of proxy voting, which permits shareholders to

vote through a representative without being present at the shareholder meeting. 8 Before 1934,

State law governed the manner in which proxies to cast shareholders’ votes were solicited, but

Cort v. Ash, 422 U.S. 66, 84 (1975). Foreign issuers, as that term is defined in 17 CFR 240.3b-4(b), are not

creatures of State law. Accordingly, to the extent this release refers to State law, the corresponding reference

for foreign issuers would be to the applicable foreign law. Foreign private issuers, as defined in 17 CFR

240.3b-4, are exempt from the Commission’s proxy requirements with respect to solicitations of their own

security holders. 17 CFR 240.3a12-3(b); Regulation 14A (17 CFR 240.14a-1 through 240.14b-2). Foreign

private issuers also are not subject to information statement requirements. See Regulation 14C (17 CFR

240.14c-1 through 240.14c-101).

CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 89 (1987); see also, e.g., 8 Del. C. sections 211, 212.

If permitted under State law, and in accordance with any applicable provisions in a company’s governing

documents, action may be taken by written consent without a meeting and without a vote. See, e.g., 8 Del. C.

section 228.

See, e.g., 8 Del. C. section 212; Model Bus. Corp. Act sections 7.01 through 7.08.

See Jill E. Fisch, From Legitimacy to Logic: Reconstructing Proxy Regulation, 46 VAND. L. REV. 1129, 113438 (1993) (“Fisch 1993”) (explaining that “proxy voting developed as a means of giving dispersed

shareholders an opportunity to vote.”).

“[t]oo often proxies [were] solicited without explanation to the stockholder of the real nature of

the questions for which authority to cast his vote [was] sought.” 9 In response, when it passed the

Exchange Act in 1934, Congress included section 14 10 to give the Commission authority to

regulate the proxy solicitation process. 11 Section 14(a) 12 makes it unlawful to solicit any proxy

or consent or authorization in respect of any security “in contravention of such rules and

regulations as the Commission may prescribe as necessary or appropriate in the public interest

or for the protection of investors.” 13 Relying on its authority under section 14(a), the

Commission in 1942 adopted the predecessor of Rule 14a-8 to require a company to include

certain shareholder proposals in its proxy statement and identify the proposal in its form of

proxy. 14

S.Rep. No. 792, 73d Cong., 2d Sess. (1934) at 12; see also H.R. Rep. No. 1383 at 13-14, 73 Cong., 2d Sess.

(1934) (“Insiders have at times solicited proxies without fairly informing the stockholders of the purposes for

which the proxies are to be used and have used such proxies to take from the stockholders for their own selfish

advantage valuable property rights.”).

15 U.S.C. 78n (“section 14”).

See H.R. Rep. No. 1383 at 13-14, 73d Cong., 2d Sess. (1934) (“the proposed bill gives the Commission power

to control the conditions under which proxies may be solicited with a view to preventing the recurrence of

abuses which have frustrated the free exercise of the voting rights of stockholders.”).

15 U.S.C. 78n(a) (“section 14(a)”).

15 U.S.C. 78n(a)(1). See also, section II.A.3, discussing the Commission’s authority under Section 20(a) of the

Investment Company Act of 1940 (“Investment Company Act”).

See Release No. 34-3347 (Dec. 18, 1942) [7 FR 10655 (Dec. 22, 1942)] (adopting Rule X-14A-7, 17 CFR

240.14a-7) (“1942 Adopting Release”). In 1947, the Commission renumbered the rule to its present

designation, 17 CFR 240.14a-8. See Adoption of Revised Proxy Rules, Release No. 34-4037 (Dec. 16, 1947)

[12 FR 8768 (Dec. 24, 1947)]. A reference in this release to “Rule 14a-8” includes Rule X-14A-7 unless stated

otherwise. In addition, we use the terms “companies,” “registrants,” and “issuers” interchangeably in this

release. Unless otherwise specified, these terms are intended to be broadly inclusive and encompass not only

corporations, but also other types of entities, such as partnerships and other business organizations, that may be

subject to our proxy rules and regulations. The use of different terms in different places is not meant to connote

a substantive difference.

As explained by then-Chairman Ganson Purcell, Rule 14a-8 was adopted to facilitate

shareholders’ ability under State law 15 to present certain proposals for consideration at a

company’s annual or special meeting, 16 and to facilitate the ability of all shareholders to

consider and vote by proxy on such proposals. 17 Specifically, shortly after the rule was adopted,

Chairman Purcell stated that the purpose of the rule was to “assure to the stockholders . . . those

rights that [the stockholder] has traditionally had under State law, to appear at the meeting; to

make a proposal; to speak on that proposal at appropriate length; and to have [the] proposal

voted on.” 18 The rule originally required a company to include a shareholder proposal that is “a

proper subject for action by the security holders,” as long as the shareholder proponent 19

provided “reasonable notice” to the company. 20 Although the rule did not specify that State law

We refer to State law to mean a State’s legislative enactment and judicial interpretations of such enactment, as

well as State common law.

See, e.g., 8 Del. C. section 211; Model Bus. Corp. Act section 7.01. Throughout this release, when discussing

State corporate law, we frequently refer to Delaware law because of the large percentage of public companies

incorporated under that State’s law. The Delaware Division of Corporations reports that over 50% of publicly

traded companies listed on U.S. stock exchanges are incorporated in Delaware. See Delaware Dep’t of State,

Facts and Myths, Delaware Corporate Law (n.d.), https://corplaw.delaware.gov/facts-and-myths/. We also

frequently refer to the Model Business Corporation Act (“MBCA”) because the corporate statutes of many

States adopt or closely track its provisions.

See Securit[ies] and Exchange Commission Proxy Rules: Hearings on H.R. 1493, H.R. 1821, and H.R. 2019

Before the House Comm. on Interstate and Foreign Commerce, 78th Cong., 1st Sess. 172 (1943) (Statement of

the Hon. Ganson Purcell, Chairman, Securities and Exchange Commission) (“Statement of Chairman

Purcell”).

Id.

Throughout this release, references to “shareholder proponent” and “proponent” generally refer to shareholders

who submit proposals under Rule 14a-8, and references to “shareholder proposal” and “proposal” generally

refer to proposals submitted under Rule 14a-8, unless the context otherwise requires, such as when discussing

proposed amendments to Rule 14a-4 in the context of discretionary voting authority for proposals submitted

outside the Rule 14a-8 process.

See 1942 Adopting Release in which the predecessor of current Rule 14a-8, Rule X-14A-7, provided that “[i]n

the event that a qualified security holder of the issuer has given the management reasonable notice that such

security holder intends to present for action at a meeting of security holders of the issuer a proposal which is a

proper subject for action by the security holders, the management shall set forth the proposal and provide

means by which security holders can make a specification” on such matter; see also infra section II.A.1.b.

provides the standard for determining what was “a proper subject for action by the security

holders,” the Commission subsequently issued a release containing a letter from the thenDirector of the Division of Corporation Finance clarifying 21 that State law provided the

applicable standard. The Commission later amended the text of Rule 14a-8 to make this point

explicit by providing that a proposal could be excluded from a company’s proxy materials if

“the proposal as submitted is, under the laws of the issuer’s domicile, not a proper subject for

action by security holders.” 22

As discussed in greater detail in section II.A.1.b, however, the Commission has

amended Rule 14a-8 multiple times in ways that incrementally have increased the

Commission’s role in defining and interpreting standards that implicate core State law corporate

governance matters, such as shareholder voting rights. As a result, despite the Commission’s

prior statements asserting that Rule 14a-8 was not “intended to supplant [S]tate law but . . . to

reinforce [it] with a sturdy [F]ederal disclosure and proxy solicitation regime,” 23 numerous

See Release No. 40-375, 34-3638 (Jan. 3, 1945) [Letter of Division of Corporation Finance Director published

at 11 FR 10988, 10995 (Sept. 27, 1946)] (“1945 Release”) (stating that Rule 14a-8 pertains to matters that “are

proper subjects for stockholders’ action under the laws of the state under which [the company] is organized”).

In a subsequent release, the Commission stated that it had previously adopted as its own the view that “State

law is the standard” for determining what is a proper subject for shareholder action. See also Adoption of

Amendments to Proxy Rules, Release No. 34-4979 (Jan. 6, 1954) [19 FR 246 (Jan. 14, 1954)] ("1954 Adopting

Release”) (citing 1945 Release).

1954 Adopting Release. The rule’s current language—“If the proposal is not a proper subject for action by

shareholders under the laws of the jurisdiction of the company’s organization”—was adopted in 1998. See

Amendments to Rules on Shareholder Proposals, Release No. 34-40018 (May 21, 1998) [63 FR 29106, 29120

(May 28, 1998)] (“1998 Adopting Release”).

See, e.g., Shareholder Proposals, Release No. 34-56160 (July 27, 2007) [72 FR 43466, 43467 (Aug. 3, 2007)]

(“2007 Proxy Access Long Release”) (explaining that “the federal proxy authority is not intended to supplant

state law, but rather to reinforce state law rights with a sturdy federal disclosure and proxy solicitation

regime,” and noting as an example that “Rule 14a-8, the shareholder proposal rule, explicitly provides that a

shareholder proposal is not required to be included in a company’s proxy materials if it ‘is not a proper subject

for action by shareholders under the laws of the jurisdiction of the company’s organization’” (citing 17 CFR

240.14a-8(i)(1))).

observers have expressed the view that Rule 14a-8 effectively has evolved to function as a

Federal common law as to what constitutes a proper subject for shareholder action. 24 But

Congress’s grant of authority to the Commission in the Exchange Act does not authorize such

evolution. Section 14 does not purport to displace State law with respect to shareholder

governance rights. As discussed below, only Congress can authorize the Commission to

intervene in matters traditionally left to State law.

Accordingly, as discussed in more detail in the sections that follow, we propose to

rescind Rule 14a-8 in its entirety because the rule exceeds the Commission’s statutory authority

under section 14(a) by improperly intruding into State law without express authorization from

Congress. 25 Moreover, even if the rule or aspects of it were within the Commission’s statutory

authority, there are independent policy reasons to rescind Rule 14a-8 in its entirety and leave

decisions regarding the appropriate role of shareholder proposals in the corporate governance

process to the States or, if permitted by State law, to companies. In reaching this determination,

we note that: (i) many of the justifications that were originally provided to support adoption of

Rule 14a-8 either have not been substantiated in practice or are less compelling today; (ii) Rule

See, e.g., Jill Fisch et al., Stockholder Proposals—Law and Policy Considerations, Harv. L. Sch. F. Corp.

Governance (Dec. 9, 2025), available at https://corpgov.law.harvard.edu/2025/12/09/stockholder-proposalslaw-and-policy-considerations/ (“Yet, by regulating proxy access, the SEC determines what matters are proper

or improper for stockholder meetings, often restricting stockholder rights beyond the contours of state law.”);

Fisch 1993 at 1151 (“[B]oth in determining appropriate criteria for excluding shareholder proposals and in

applying those criteria, the SEC does not replicate passively the annual meeting process by applying state law

principles, but creates a Federal common law as to what constitutes a proper subject for shareholder action”);

Kevin W. Waite, Note, The Ordinary Business Operations Exception to the Shareholder Proposal Rule: A

Return to Predictability, 64 FORDHAM L. REV. 1253, 1259-60 (1995) (“Because little state law was developed

discussing what was a proper subject for action by security holders, the SEC staff developed its own common

law regarding what was a proper subject for shareholder action. While the SEC claimed to be relying on state

law in determining what was a proper subject for shareholder action, the SEC more accurately appeared to be

deciding what the state law was and influencing state courts in deciding the rare case that arose regarding what

was a proper subject for shareholder action.”) (citations omitted).

See infra section II.A.

14a-8 has had, and will continue to have, certain unintended consequences that further

undermine any justification for retaining the rule; and (iii) retaining any version of Rule 14a8—assuming the Commission were authorized to do so—is unwarranted and unlikely to avoid

those unintended consequences. 26 Nevertheless, to better understand the potential impact of

rescinding Rule 14a-8, we are seeking comment on the proposed rescission, potential reliance

interests in the current rule, and alternative approaches within the scope of the Commission’s

authority. 27

We are also proposing amendments to 17 CFR 240.14a-4(c) (“Rule 14a-4(c)”), which

addresses when a proxy card submitted by a shareholder may confer discretionary voting

authority on the proxy holder with respect to a matter that is not included on the proxy card. The

proposed amendments to Rule 14a-4(c) are intended to provide companies with greater

flexibility, and shareholders with greater control, regarding proposals for which a company may

seek discretionary voting authority. Occasions for seeking such authority may become more

frequent if Rule 14a-8 is rescinded, as proposed. While our proposed amendments to Rule 14a4(c) are aligned with our proposed rescission of Rule 14a-8, there are independent justifications

See infra section II.A. President Donald J. Trump issued an executive order titled, “Protecting American

Investors from Foreign-Owned and Politically-Motivated Proxy Advisors” on Dec. 16, 2025. This order,

among other things, ordered the “SEC Chairman … [to] consider revising or rescinding all rules, regulations,

guidance, bulletins, and memoranda relating to shareholder proposals, including Rule 14a-8 (17 CFR 240.14a8), that are inconsistent with the purposes of [such executive order].” Exec. Order No. 14366, Protecting

American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors, 90 FR 58503 (Dec. 16,

2025).

The Commission has recently received several rulemaking petitions requesting to preserve or amend, but

largely retain, Rule 14a-8. See, e.g., Ceres et al., Petition Regarding Amendments to Rule 14a-8 Under the

Securities Exchange Act of 1934 (July 23, 2026), available at

https://www.sec.gov/files/rules/petitions/2026/petn4-917.pdf; Shareholder Rights Group et al., Defend

Shareholder Rights Petition (July 20, 2026), available at https://www.sec.gov/files/rules/petitions/2026/petn4918.pdf; Bruce A Burkey et al., Americans for Financial Reform (July 20, 2026), available at

https://www.sec.gov/files/rules/petitions/2026/petn4-918.pdf. We will consider these petitions, together with

any comments received in response to this release, when considering whether to finalize the proposed

rescission of Rule 14a-8.

for the proposed amendments to Rule 14a-4 even if the proposed rescission of Rule 14a‑8 is not

adopted.

Finally, we are proposing certain other amendments to facilitate implementation of the

proposed changes to the proxy rules and conforming amendments to our rules and forms.

II.

DISCUSSION OF PROPOSED AMENDMENTS

A. Proposed Rescission of Rule 14a-8

We are proposing to rescind Rule 14a-8 because the rule exceeds the Commission’s

statutory authority. We also believe there are independent policy reasons to rescind Rule 14a-8.

Under the proposed rescission, the Federal proxy rules would no longer require companies to

include in their proxy materials shareholder proposals on the basis that they satisfy procedural

and substantive requirements established under Federal law. Instead, State law or, if permitted

by State law, a company’s governing documents would determine whether a shareholder

proposal would be required to be included in a company’s proxy materials.

1. Rule 14a-8 Exceeds the Commission’s Statutory Authority

Although section 14(a) authorizes the Commission to regulate proxy solicitations, the

question of whether the vote that is the subject of such a solicitation is permissible in the first

instance—i.e., 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. Because section 14(a) does not authorize the Commission to regulate the

scope of matters presented to shareholders for a vote, the Commission lacks the power to

override State law on this threshold question. 28 To the contrary, it has long been understood that

section 14(a) empowers the Commission to facilitate—not alter—State law rights by regulating

the manner in which the proxy solicitation is made and the information that the soliciting party

must disclose. 29 As explained below, the rule has come to operate not as a procedural

mechanism to facilitate shareholders’ rights under State law through the proxy process, but as a

substantive Federal overlay that improperly intrudes into matters of State law by dictating that

companies include (or allowing them to exclude) certain shareholder proposals in the

companies’ proxy materials. Because Congress has not expressly authorized such an intrusion,

Rule 14a-8 exceeds the scope of the Commission’s authority. We therefore propose to rescind

the rule in its entirety.

a. Scope of Section 14(a) Authority

Section 14(a) makes it unlawful “to solicit any proxy or consent or authorization in

respect of any security” “in contravention of such rules and regulations as the Commission may

prescribe as necessary or appropriate in the public interest or for the protection of investors.” 30

The statutory text limits the Commission’s regulatory authority to proxy solicitation—the

request for the power to vote on a shareholder’s behalf—which encompasses the manner in

which that solicitation is made (e.g., the timing and form of proxy) and the information that the

Congress requires that certain matters be presented to shareholders for a vote. See, e.g., 15 U.S.C. 78n-1

(requiring advisory say-on-pay, say-on-frequency, and golden parachute arrangements to be submitted for

shareholder vote) and section II.A.3 (discussing provisions of the Investment Company Act that require certain

matters to be presented to shareholders for a vote). The fact that Congress has established Federal voting rights

in these instances does not alter the scope of the Commission’s authority over the solicitation of proxies under

section 14. Nor does the discussion in this release of the Commission’s authority under section 14 address the

legal status of these other provisions.

See infra note 58.

15 U.S.C. 78n(a)(1). We discuss section 14(a)’s references to “the public interest” and “the protection of

investors” in more detail below.

soliciting party must disclose in the request. The Commission therefore is authorized to regulate

the form of proxy solicitation and the means by which shareholders are asked to express their

voting position in response to the solicitation. We construe “in the public interest or for the

protection of investors” in light of the statutory context to authorize the Commission to prohibit

false or misleading statements in a proxy solicitation and to promulgate disclosure requirements

ensuring that shareholders are adequately informed of the proposals on which they may vote

under State law and the voting positions for which their proxies would be used. 31 This authority

is consistent with other grants of authority provided to the Commission under the Exchange

Act, which focus on ensuring that investors receive accurate disclosure of material

information. 32

While section 14(a) provides authority to facilitate shareholders’ exercise of State law

rights by regulating the proxy solicitation process, nothing in section 14(a) authorizes the

Commission to regulate the scope of the voting or other rights shareholders may have under

State law, such as the right to propose a matter for a shareholder vote. 33 Rather, by focusing on

the solicitation of a shareholder’s vote, the text makes clear that Congress’s purpose was to

ensure that shareholders are fully informed as to the use of the proxy being solicited and to

protect them from being denied the fair exercise of their State law voting rights. 34

See, e.g., Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (1991) (applying Rule 14a-9 to allegedly

misleading disclosures by directors seeking shareholder approval of a merger).

See 15 U.S.C. 78j, 78l, 78m.

But see supra note 28.

Cf. Bus. Roundtable v. SEC, 905 F.2d 406, 410 (D.C. Cir. 1990) (“Proxy solicitations are, after all, only

communications with potential absentee voters. The goal of federal proxy regulation was to improve those

communications and thereby to enable proxy voters to control the corporation as effectively as they might have

by attending a shareholder meeting.” (italics in original)).

Section 14(a)’s grant of authority to regulate solicitations of the power to vote on a

shareholder’s behalf presupposes that the shareholder already has a right to vote on particular

proposals. The scope of those rights has traditionally been governed by State law, and section

14(a) does not purport to disturb that allocation. 35 If Congress had intended section 14(a) to

displace State law on the subject of shareholder voting, presumably it would have referred to

shareholder voting in section 14(a). For example, the Public Utility Holding Company Act

(“PUHCA”), enacted by Congress in the year after the Exchange Act, 36 directed the

Commission to oversee the allocation of voting power in public utility companies. Section

11(b)(2) of that law authorized the Commission “[t]o require by order . . . that the corporate

structure . . . does not . . . unfairly or inequitably distribute voting power among security

holders.” 37 No comparable language appears in section 14(a). 38

Therefore, the Commission’s authority under section 14(a) to regulate the proxy

solicitation process does not permit the Commission to displace State law regarding shareholder

voting rights. 39 By establishing standards not found in State law for when a shareholder

proposal must be included in, or may be excluded from, a company’s proxy materials, the

See supra notes 5, 7, 23, and 28.

Pub. L. No. 74-333 (Aug. 26, 1935), 15 U.S.C. 79 et seq., repealed by Pub. L. 109-58, title XII, section 1263,

Aug. 8, 2005, 119 Stat. 974.

15 U.S.C. 79k(b)(2) (2004); see also PUHCA section 7(c)(1) (granting the Commission authority to prohibit

the sale of common stock unless it has “at least equal voting rights with[] any outstanding security of the

declarant”) and (e) (barring the exercise of voting rights if “the Commission finds that such exercise of such

privilege or right will result in an unfair or inequitable distribution of voting power among holders of the

securities of the declarant”) [15 U.S.C. 79g(c)(1), (e) (2004)]; supra note 28.

But see supra note 28.

Cf. Bus. Roundtable, 905 F.2d at 411 (stating that section 14(a) was not intended to authorize the Commission

to “step beyond control of voting procedure and into the distribution of voting power”).

Commission effectively dictates the scope of shareholder voting rights and, therefore, exceeds

its authority.

To the extent legislative history is considered, it only underscores the limitations on the

Commission’s authority that are inherent in the statutory text and structure. That history

indicates that Congress’s purpose in enacting this provision was to empower the Commission to

facilitate “fair corporate suffrage” on the proxy by regulating the “conditions under which

proxies may be solicited.” 40 It also suggests an intent to authorize regulations that would protect

“free exercise of the voting rights” of shareholders, 41 require “adequate disclosure” of the

matters to be decided at the shareholder meeting, 42 and prevent “irresponsible outsiders” and

“unscrupulous corporate officials” from “concealing and distorting facts” in their proxy

solicitations. 43 Courts have thus interpreted section 14(a) as bearing “almost exclusively on

disclosure,” with a “central concern” that proxies not be obtained through “deceptive or

inadequate disclosure in proxy solicitation.” 44

These limitations are also consistent with the Commission’s longstanding understanding

that its authority under section 14(a) is limited to promulgating “federal proxy rules [that]

facilitate shareholders’ exercise of [S]tate law rights,” 45 such that the corporate proxy process

“functions, as nearly as possible, as a replacement for an actual, in-person gathering of security

H.R. Rep. No. 1383 at 13-14, 73d Cong., 2d Sess. (1934); see also, e.g., Virginia Bankshares, Inc. v.

Sandberg, 501 U.S. 1083, 1103 (1991).

H.R. Rep. No. 1383 at 14, 73d Cong., 2d Sess. (1934); see also, e.g., Virginia Bankshares, 501 U.S. at 1103.

H.R. Rep. No. 1383 at 13-14, 73d Cong., 2d Sess. (1934); S.Rep. No. 792 at 12, 73d Cong., 2d Sess. (1934);

S.Rep. No. 1455 at 75, 73d Cong., 2d Sess. (1934).

S.Rep. No. 1455 at 77.

Bus. Roundtable, 905 F.2d at 410.

2007 Proxy Access Long Release at 43478.

holders.” 46 As the Commission has acknowledged, section 14(a) does not grant it authority to

“alter those [State law] rights.” 47

Interpreting section 14(a)(1) more broadly would not only lack any basis in the statutory

text and structure but would inappropriately interfere with matters traditionally reserved to the

States. As the Supreme Court explained in Santa Fe Industries, Inc. v. Green, “[a]bsent a clear

indication of congressional intent, we are reluctant to federalize the substantial portion of the

law of corporations that deals with transactions in securities, particularly where established

State policies of corporate regulation would be overridden.” 48 The approach taken by the

Supreme Court in Santa Fe accords with a substantial body of precedent establishing a clear

statement rule for laws tilting the balance of federalism. 49 For example, in Business Roundtable,

the U.S. Court of Appeals for the District of Columbia Circuit found that section 14(a)(1) did

not express an intention by Congress to override State law with respect to “corporate

governance.” 50 To the contrary, the court explained, those advocating for the Exchange Act in

Congress expressly disclaimed any intent to confer upon the Commission authority to interfere

in corporate management: opponents had raised concerns that the bill would confer “power to

Id. at 43467 n.19 and accompanying text (citing Bus. Roundtable, 905 F.2d at 410); see also Facilitating

Shareholder Director Nominations, Release No. 33-9046 (June 10, 2009) [74 FR 29024 (June 18, 2009)].

Id. at 43478.

430 U.S. 462, 479 (1977); see id. (rejecting an interpretation of Exchange Act Rule 10b-5 that “would overlap

and quite possibly interfere with state corporate law”); see also Bus. Roundtable, 905 F.2d at 408 (“[T]he

Exchange Act cannot be understood to include regulation of an issue that is so far beyond matters of disclosure

… and that is concededly a part of corporate governance traditionally left to the states.”). In section II.A.1.c

below, we discuss how the structure and conditions of current Rule 14a-8, including its various eligibility

criteria and bases for exclusion, can act to supplant State law voting rights.

Ala. Ass’n of Realtors v. Dep’t of Health & Hum. Servs., 594 U.S. 758, 764 (2021) (“Our precedents require

Congress to enact exceedingly clear language if it wishes to significantly alter the balance between federal and

state power . . . .”) (quoting U.S. Forest Serv. v. Cowpasture River Pres. Ass’n, 590 U.S. 604, 621-622 (2020)).

905 F.2d at 408.

interfere in the management of corporations,” and the Senate Committee on Banking and

Currency responded that it had “no such intention” and that the bill “furnish[ed] no justification

for such an interpretation.” 51 Similarly, neither the text nor legislative history of section 14(a)

contains any indication that the statute authorizes the Commission to interfere with shareholder

rights established by State law. More generally, members of Congress have repeatedly proposed

bills to create a “federal corporation law,” but none has been enacted. 52 On the rare occasions

when Congress has intended for the Commission to intervene directly in the governance of

public companies, it has done so through clear statutory mandates. 53

Nor do the references to the “public interest” and “protection of investors” in section

14(a) provide a basis for the Commission to intrude into shareholder voting rights or corporate

management. Courts have consistently recognized that “public interest” is not an open-ended

delegation of power; rather, such language “must be limited to the purposes Congress had in

mind when it enacted the legislation.” 54 Those statutory purposes are discerned from the text

Id. at 411 (citing S.Rep. No. 792, 73d Cong., 2d Sess. 12 (1934)).

Manuel Cohen, Federal Legislation Affecting the Public Offering of Securities, 28 Geo. Wash. L. Rev. 119,

124 n.18 (1959) (“For some years after the passage of Securities Act of 1933, bills were introduced in the

Senate proposing federal incorporation. None of these were enacted.”); Joel Seligman, The Transformation of

Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance 205-10 (3d

ed. Aspen Publ’rs 2003) (describing efforts by the Roosevelt administration to regulate corporate governance

and its eventual abandonment); Symposium: Federal Chartering of Corporations: A Proposal, 61 Geo. L.J. 89,

89 n. 1 (1972) (collecting bills that would have established federal corporate chartering from the 1930s).

See, e.g., Exchange Act section 10A(m) (directing the Commission to adopt rules requiring national securities

exchanges to prohibit the listing of any security of an issuer that does not meet certain specified requirements

related to audit committee procedures and independence) [15 U.S.C. 78j-1(m)]; Exchange Act section 14A

(requiring public companies, among other things, to conduct a separate shareholder advisory vote to approve

the compensation of executives, as disclosed pursuant to Item 402 of Regulation S-K) [15 U.S.C. 78n-1].

Bus. Roundtable, 905 F.2d at 413 (quoting NAACP v. Fed. Power Comm’n, 425 U.S. 662, 670 (1976)); see

generally FCC v. Consumers’ Research, 606 U.S. 656, 690 (2025) (explaining that the Supreme Court has

“long held that the words ‘public interest’ in a regulatory statute do not encompass the general public welfare

but rather take meaning from the purposes of the regulatory legislation”) (quotation marks and citation

and context of the statute, which in turn cabin what is “necessary or appropriate” under the

Commission’s rulemaking authority. 55 In the context of section 14(a), this means that rules

adopted under this provision must focus on the statute’s core concern with regulating the proxy

solicitation process and the disclosures within the solicitations—not on defining or reshaping

the substantive scope of shareholder voting rights. The phrase “protection of investors” likewise

cannot reasonably be construed to authorize the Commission to engage in such intrusions into

State law. 56 To read these terms otherwise would permit the Commission to use the Federal

securities laws to supplement or override “firmly established” State law authority over

shareholder rights—an approach that the Supreme Court has rejected absent explicit

congressional authorization. 57

b. Evolution of Rule 14a-8

The earliest versions of the Commission’s proxy rules enacted under section 14(a)

focused on disclosure and providing shareholders with the means to specify the action to be

taken pursuant to their proxies. 58 In 1942, the Commission adopted Rule 14a-8’s predecessor,

omitted). See also Acceleration of Effectiveness of Registration Statements of Issuers with Certain Mandatory

Arbitration Provisions, Release No. 33-11389 (Sept. 17, 2025) [90 FR 45125 (Sept. 19, 2025)] (noting that

courts have considered the scope of the public interest and investor protection standard in the context of the

Federal securities laws and determined that, when applying this standard, it is only permissible to consider

those matters over which the Commission has authority under the Federal securities laws).

See Davis v. Mich. Dep’t of Treasury, 489 U.S. 803, 809 (1989) (explaining that “statutory language cannot be

construed in a vacuum,” but rather “the words of a statute must be read in their context and with a view to their

place in the overall statutory scheme”).

See id.

See, e.g., CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 89 (1987).

Release No. 34-378 (Sept. 24, 1935) 1935 WL 29270 (requiring a “brief description” of the matters to be

considered, together with the proposed action to be taken by the proxy holder, requiring the mailing of proxy

materials to record owners at the requesting shareholder’s expense, and prohibiting materially false or

misleading statements under a general anti-fraud provision); Release No. 34-1823 (Aug. 11, 1938) [3 FR 1991

(Aug. 13, 1938)] (introducing the concept of the proxy statement that must be given to each person solicited,

and requiring that each matter to be considered be subject to a separate yes or no vote).

Rule X-14A-7, which established a requirement that management include in the company’s

proxy materials a shareholder proposal that “is a proper subject for action by the security

holders.” 59 Although the Commission did not define “proper subject” in the rule, it issued a

release in 1945 that contained a letter from Division of Corporation Finance Director Baldwin

B. Bane explaining that the term referred to “such matters . . . as are proper subjects for

stockholders’ action under the laws of the [S]tate under which [the company] is organized.” 60

The letter responded to a company that sought exclusion of proposals relating to matters

of a “general political, social or economic nature” and asked whether such proposals were a

proper subject for shareholder action under Rule X-14A-7. Without referencing the laws of the

State under which the company was organized, Director Bane stated that “[i]t is my conclusion

that the proposals which have been presented to you are not ‘proper subjects for action’ by your

company’s stockholders within the meaning of that phrase as used in Rule X-14A-7.

Consequently, it will be unnecessary for you to include the proposals in the management’s

proxy statement if you do not wish to do so.” 61 Director Bane also stated that “[it] was not the

intent of Rule X-14A-7 to permit stockholders to obtain the consensus of other stockholders

with respect to matters which are of a general political, social or economic nature. Other forums

Rule X-14A-7 provided in pertinent part: “In the event that a qualified security holder of the issuer has given

the management reasonable notice that such security holder intends to present for action at a meeting of

security holders of the issuer a proposal which is a proper subject for action by the security holders, the

management shall set forth the proposal and provide means by which security holders can make a specification

as provided in [the proxy rules].”17 CFR 240.14a-7 (1943). The 1942 rule also introduced the requirement that

management, if it opposed the shareholder’s proposal, include in its proxy materials the name and address of

the proponent and a 100-word statement in support of the proposal, if requested by the proponent. Id. The

maximum length of a proponent’s supporting statement under Rule 14a-8 has been revised by the Commission

on several occasions and is currently 500 words, inclusive of the proposal text.

See 1945 Release.

Id.

exist for the presentation of such views.” 62 Whether intentionally or not, Director Bane’s letter

effectively positioned Rule X-14A-7 as a new Federal common law for shareholder voting

rights, and the letter’s informal understanding of whether a matter was “a proper subject for

action” does not appear to have been based on the law of any particular State, let alone the State

under which the company was organized.

In the years that followed, the Commission repeatedly amended what is now Rule 14a-8

in ways that progressively expanded the Commission’s role in determining, interpreting, and

effectively shaping matters traditionally governed by State law. As discussed above, the 1942

rule relied substantially on the concept of “proper subject for action” to determine which

proposals must be included on the company’s proxy. Due to a lack of relevant State laws to

provide guidance on what was a “proper subject,” as questions arose about the content of

shareholder proposals, proponent conduct, and management objections, the Commission

increasingly inserted Federal criteria in place of State law standards. 63

Through a series of amendments adopted in 1947 and 1948, the Commission required

issuers to provide an explanation to the Commission when asserting that shareholder proposals

Id.

See Medical Committee for Human Rights v. SEC, 432 F.2d 659, 677 (D.C. Cir. 1970), vacated, 404 U.S. 403

(1972) (noting that “the paucity of applicable state law giving content to the concept of ‘proper subject’ led the

Commission to seek guidance from precedent existing in jurisdictions which had a highly developed

commercial and corporate law and to develop its own ‘common law’ relating to proper subjects for shareholder

action”); see also Hearings on Problems in Enforcing the Securities Laws Before a Subcommittee of the Senate

Committee on Banking and Currency, 85th Cong., 1st Sess. 117-118 (1957) (“In the absence of a State statute

establishing that a proposal is a proper subject for stockholder action, the Commission will rely on the

common law if this can be ascertained. It will also consider other sources such as the corporate law of other

States, particularly of the leading commercial States, as well as the decisions of the Federal courts, textbooks,

law journals, and other similar material where the question may be discussed.”).

were improper or untimely 64 and introduced new bases for excluding such proposals. 65 These

amendments provide an early example of how the proxy rules began to delineate the limits of

shareholder voting rights independent of State law. In particular, adding new exclusionary bases

that went beyond whether a proposal was a “proper subject for action” under State law opened

the door for more grounds for exclusion to be added, sometimes on a seemingly ad hoc basis in

response to emergent issues. As a result of these and subsequent amendments, it became

possible—as remains the case today—for there to be circumstances under which a shareholder’s

proposal is a “proper subject for action” and thereby permissible under State law but eligible for

exclusion from the proxy materials under Rule 14a-8. 66

Later amendments, including the 1952 exclusion for proposals promoting “general

economic, political, racial, religious, social or similar causes” 67 and the 1954 “ordinary

See Adoption of Revised Proxy Rules, Release No. 34-4037 (Dec. 16, 1947) [12 FR 8768 (Dec. 24, 1947)].

See Adoption of Amendments to Proxy Rules, Release No. 34-4185 (Nov. 5, 1948) [13 FR 6678 (Nov. 12,

1948)] (“1948 Adopting Release”).

See 1948 Adopting Release. For example, the 1948 amendments added provisions permitting exclusion on the

basis of, among other things, a personal grievance or resubmission of a proposal. Thus, a proposal that may

have been a proper subject for shareholder action under State law but that (1) could be characterized as

submitted “primarily for the purpose of enforcing a personal claim or of redressing a personal

grievance against the issuer or its management” or (2) was substantially the same proposal as was submitted

for a vote of shareholders at the previous annual meeting (or any subsequent special meeting) that received less

than three percent of votes cast could be excluded from a company’s proxy materials. Id. at 6679. These

exclusions remain, as subsequently revised, in the current rule. See 17 CFR 240.14a-8.

See Amendment of Proxy Rules, Release No. 34-4775 (Dec. 11, 1952) [17 FR 11431 (Dec. 18, 1952)]. In 1972,

the Commission revised the existing “social policy” exclusion relating to “general economic, political, racial,

religious, social or similar causes” to eliminate the formulation that focused on whether a proposal was

submitted “primarily for the purpose of” promoting a particular cause. Solicitations of Proxies, Release No.

34-9784 (Sept. 22, 1972) [37 FR 23178 (Oct. 31, 1972)]. In its place, the Commission adopted a broadened

standard that turned on the relationship between the issuer and the subject matter of the proposal. Id. at 23179

(permitting exclusion of a matter that is “not significantly related to the business of the issuer or is not within

the control of the issuer”). As the adopting release explained, the amendment sought “to replace the subjective

terms of the provision with objective standards to the extent feasible and thereby create greater certainty in the

application of the rule.” Id. at 23178. The Commission also made a corresponding revision to the personal

grievance exclusion, removing similar language so that the two exclusions no longer required inquiry into a

proponent’s motivations. See id. at 23179.

business” exclusion, 68 further entangled Federal criteria with State law requirements. The

application of these criteria often required judgments about matters of boards’ authority and

shareholders’ role in corporate decision-making. The 1954 amendments also restructured Rule

14a-8 such that the “proper subject for action” criterion was no longer a threshold qualification

for the inclusion of a shareholder proposal; instead, it was re-framed as a basis permitting an

issuer to exclude a proposal if it was not a proper subject for action under State law. 69

Moreover, “the burden of proof” to make that showing was placed “upon the management.” 70

In 1976, the Commission reorganized the rule into the modern structure of 13

substantive exclusions. 71 In doing so, the Commission made inclusion of shareholder proposals

in the company’s proxy materials dependent on, among other things, whether proposals relate

significantly to an issuer’s business or implicate areas of board and management discretion. 72

Some of these exclusions were based on the Commission’s interpretation of State law

allocations of authority between shareholders and management, and the rest lacked any

See 1954 Adopting Release.

See id. Through this amended language, the 1954 amendments included in Rule 14a-8 for the first time an

express reference to State law, which was previously referenced only in the 1945 Release.

See id.

See Adoption of Amendments Relating to Proposals by Security Holders, Release No. 34-12999 (Nov. 22,

1976) [41 FR 52994 (Dec. 3, 1976)] (“1976 Adopting Release”). The 1976 amendments significantly changed

the approach to the existing “social policy” exclusion. Specifically, the Commission removed from the

exclusion the express references to “economic, political, racial, religious, social, or similar causes.” In the

adopting release for the amendments, the Commission stated that those “illustrative references” to various

causes were “superfluous and unnecessary” and that, in revising the provision, the “substance” of the existing

exclusionary basis was retained. Id. at 52997.

See, e.g., id. at 52998 (discussing the adoption of subparagraph (i)(7) of Rule 14a-8—permitting exclusion of

proposals dealing with a “matter relating to the conduct of the ordinary business operations of the issuer”—and

stating that matters that have “significant policy, economic or other implications inherent in them” were to be

“considered beyond the realm of an issuer’s ordinary business operations” and therefore not excludable under

that subparagraph).

connection to State law. 73 The Commission also added a note to Rule 14a-8(i)(1) explaining that

the propriety of a shareholder proposal under State law may depend on whether the proposal is

precatory or mandatory, signaling broader Federal takeover in the purported application of State

law concepts. 74 The note, as discussed further in section II.A.1.c below, effectively created a

presumption that precatory proposals are proper based on the Commission’s own interpretation

of State law, as opposed to deferring to States to resolve the question.

The Commission again modified the regulatory framework for shareholder proposals in

1983. 75 The adopted amendments (including revisions to the relevance, resubmission, and

personal grievance exclusions) and Commission interpretive guidance on the ordinary business

and mootness exclusions largely preserved the central role that the Commission’s

understandings of shareholder authority and corporate decision-making—traditionally the

province of State law—played in the administration of the Commission’s rule. Similarly,

revisions made in 1998, while primarily structural and intended to improve readability by

recasting the rule in a question-and-answer format, carried over the existing exclusionary

framework. 76

For example, the Commission adopted Rule 14a-8(i)(11) [17 CFR 240.14a-8(i)(11)] to permit the exclusion of

a proposal that substantially duplicates one previously submitted by another shareholder. The Commission

explained that this rule was adopted “in order to eliminate the possibility of shareholders having to consider

two or more substantially identical proposals submitted to an issuer by proponents acting independently of

each other,” without citing any connection to State law. See 1976 Adopting Release.

See id. at 52996; 17 CFR 240.14a-8, Note to subparagraph (c)(1) (1977).

See Amendments to Rule 14a-8 Under the Securities Exchange Act of 1934 Relating to Proposals by Security

Holders, Release No. 34-20091 (Aug. 16, 1983) [48 FR 38218 (Aug. 23, 1983)]; see also Proposed

Amendments to Rule 14a-8 Under the Securities Exchange Act of 1934 Relating to Proposals by Security

Holders, Release No. 34-19135 (Oct. 14, 1982) [47 FR 47420 (Oct. 26, 1982)] (“1982 Proposing Release”)

(proposing three alternative approaches to Rule 14a-8).

See 1998 Adopting Release.

Subsequent amendments—frequently relating to shareholder-proponent eligibility,

resubmission thresholds, and procedural requirements—have continued to revise a Federal

overlay that either constrains or expands the rights of shareholders to present a matter for a vote

without any grounding in State law. 77 Taken together, the evolution of Rule 14a-8 demonstrates

a consistent trend: over time, through rulemaking, the Commission has increasingly assumed

responsibility for defining and interpreting standards that implicate core State law concepts of

corporate governance.

As this history illustrates, the evolution of current Rule 14a-8 has taken the Commission

from its original 1942 posture of deferring to State law on the scope of which matters are a

proper subject for shareholder action to a regime in which the rule now purports to prescribe the

“few specific circumstances” under which a company is “permitted to exclude” a shareholder

proposal, including a presumption that precatory proposals are “proper unless the company

demonstrates otherwise.” 78 Throughout this evolution, there has been little meaningful analysis

of State law to justify the Commission’s line drawing. Instead, the Commission has relied on

generalized impressions of what State law requires or on inferences drawn from its own

experience administering the Federal proxy rules to construct what is, in substance, a Federal

standard governing when a shareholder proposal is a proper subject for shareholder action.

Nothing in the text or context of section 14(a) supports the Commission’s authority to prescribe

See, e.g., Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8, Release

No. 34-89964 (Sept. 23, 2020) [85 FR 70240 (Nov. 4, 2020)] (“2020 Adopting Release”) (amending

requirements under the rule including resubmission thresholds and security ownership amounts for

shareholder-proponent eligibility).

17 CFR 240.14a-8.

such a standard. Indeed, the plain and best reading of section 14(a) confirms that Congress did

not grant the Commission such authority.

c. Rule 14a-8 Exceeds the Commission’s Authority Under Section 14(a)

As discussed above, Rule 14a-8 dictates when a company “must include” a shareholder

proposal in its proxy materials. The rule prescribes eligibility and procedural requirements that a

shareholder must satisfy to have a proposal included. It then identifies the bases on which a

company may exclude a proposal. It also sets forth certain steps that a company must follow if it

seeks to rely on one of those bases. 79 Collectively, these provisions effectively operate as a

Federal standard governing when a matter is properly put before shareholders for a vote through

the proxy. 80 Because section 14(a) empowers the Commission to regulate the proxy solicitation

process—not codify its own understanding of State law rights as a matter of Federal law—Rule

14a-8 exceeds the Commission’s authority under section 14(a).

In its current form, Rule 14a-8(i) contains 13 substantive bases for exclusion. Of these,

only Rule 14a-8(i)(1) and Rule 14a-8(i)(2) directly refer to State law by permitting exclusion

when a proposal “is not a proper subject for action by shareholders under the laws of the

jurisdiction of the company’s organization,” 81 or when a proposal “would, if implemented,

cause the company to violate any [S]tate . . . law to which it is subject.” 82 The remaining

See supra section II.A.1.b.

See Fisch 1993 at 1149-50 (“Many of the restrictions imposed by the proxy rules can be attributed to a

pragmatic effort by the SEC to limit the number of shareholder proposals and to restrict use of the proxy

statement to issues of general importance to shareholders. Although such limits may be desirable, they have no

foundation in state or common-law restrictions regarding proper subjects to be raised at a shareholders’

meeting. The SEC’s authority to impose these restrictions on the use of the proxy mechanism is therefore

unclear.”).

17 CFR 240.14a-8(i)(1).

17 CFR 240.14a-8(i)(2).

exclusion bases codify criteria developed by the Commission—often evolving over time—

regarding what matters are appropriate for inclusion in a company’s proxy materials, some of

which derived from the Commission’s own interpretation of State law and the rest of which

lacked any identified connection to State law. 83 These criteria include the proposal’s subject

matter (such as matters relating to ordinary business operations, the director election process, or

dividend amount determinations) and other considerations (such as the motivation of the

proponent, economic relevance, duplication, substantial implementation, or the level of past

shareholder support). 84 Although some of these exclusion bases may intersect with concepts

found in State law, they are not derived from, and do not consistently track, State law

frameworks governing shareholder rights to present a proposal at a meeting for a vote by their

fellow shareholders.

Even where Rule 14a-8 incorporates State law considerations in Rule 14a-8(i)(1), the

rule conditions that reference with a Commission-created presumption that non-binding,

precatory proposals are proper subjects for shareholder action under State law. 85 This

presumption, grounded in prior Commission staff “experience,” effectively places a thumb on

the scale in favor of inclusion. A company bears the burden to overcome the presumption, but

meeting that burden, in practice, is often difficult. State law is frequently undeveloped,

See, e.g., 1982 Proposing Release at 47428-29 (discussing the origin of 17 CFR 240.14a-8(i)(7), the ordinary

business exclusion).

17 CFR 240.14a-8(i)(3) through 240.14a-8(i)(13).

The current Note to Rule 14a-8(i)(1) reads as follows: “Depending on the subject matter, some proposals are

not considered proper under state law if they would be binding on the company if approved by shareholders. In

our experience, most proposals that are cast as recommendations or requests that the board of directors take

specified action are proper under state law. Accordingly, we will assume that a proposal drafted as a

recommendation or suggestion is proper unless the company demonstrates otherwise.”

ambiguous, or fact-specific with respect to shareholder proposals, and the company is required

to submit an opinion of counsel supporting its views on State law, which may be particularly

difficult to obtain when State law is silent on the subject. In these situations, companies could

lack a meaningful pathway to meet their burden to rebut the presumption. As a result, what is

framed as a presumption operates in substance as a mandate. Rather than looking or deferring to

State law, the Commission has, instead, substituted its own judgment for which proposals are

proper under State law.

Beyond the 13 substantive bases for exclusion and the presumption regarding precatory

proposals, the overall structure of Rule 14a-8 underscores its function as a de facto Federal

standard for shareholder voting rights by specifying which shareholder proposals are

appropriate for inclusion in company proxy materials. Rule 14a-8 has, over time and through

successive revisions, evolved into a detailed framework that identifies the “few specific

circumstances” in which a company is “permitted to exclude” a shareholder proposal. As an

illustration of how Rule 14a-8 has expanded in complexity over time, the predecessor to Rule

14a-8 was a little over 200 words whereas the current provision is over 3,000 words. Companies

seeking to exclude a proposal must explain the basis for exclusion—often by citing one or more

of the 13 substantive grounds noted above—and, where the basis relies on State or foreign law,

provide a supporting opinion of counsel. 86 The rule also imposes numerous requirements that a

shareholder must satisfy to require inclusion of a proposal in the company’s proxy materials,

including eligibility criteria based on the amount and duration of share ownership; a

requirement that the shareholder (or a qualified representative) personally attend the meeting to

17 CFR 240.14a-8(j)(1), (j)(2)(iii).

present the proposal; and limits on the number and length of proposals. 87 None of these

requirements is grounded in State law. 88

Despite the Commission’s stated goal of “facilitat[ing] shareholders’ exercise of [S]tate

law rights” 89 and making the proxy process “function[], as nearly as possible, as a replacement

for an actual in-person gathering of security holders,” 90 these conditions and exclusions—which

constitute the vast majority of Rule 14a-8’s provisions—bear little or no connection to whether

the proposal is proper for a shareholder vote at the shareholder meeting under State law.

Instead, these requirements create a complex Federal regime governing the rights of

shareholders to present proposals for shareholder action that functionally supplants State law. 91

Section 14(a) does not empower the Commission to create such a regime.

It might be argued that Rule 14a-8 does not dictate the scope of proposals submitted by

one shareholder to be voted on by other shareholders but rather defines the conditions under

which a shareholder may take advantage of the opportunity provided by Federal law to have a

17 CFR 240.14a-8(b)(1)(i), (b)(1)(iv), (c).

While the procedural and eligibility requirements may have been intended to foster an orderly process for the

inclusion of proposals, because the Commission is not authorized by section 14(a) to interpose Federal criteria

on shareholders’ or companies’ State law rights, these requirements similarly are not supported by our

statutory authority.

2007 Proxy Access Long Release at 43478.

Id. at 43467.

See Fisch 1993 at 1151 (“[B]oth in determining appropriate criteria for excluding shareholder proposals and in

applying those criteria, the SEC does not replicate passively the annual meeting process by applying state law

principles, but creates a federal common law as to what constitutes a proper subject for shareholder action. The

SEC has thereby thrust itself into the role of determining the proper balance of power between management

and shareholders.”) (citing LOUIS LOSS, FUNDAMENTALS OF SECURITIES REGULATION 537-38 (1983)

(“Inevitably the Commission (normally its staff), while purporting to find and apply a general[ly] nonexistent

state law, has been building a ‘common law’ of its own as to what constitutes a ‘proper subject’ for

shareholder action.”)).

proposal included in the company’s proxy materials. 92 But, as described above, by establishing

standards not found in State law for whether a shareholder proposal must be included in a

company’s proxy materials, the Commission effectively dictates the scope of shareholder voting

rights and, therefore, exceeds its authority. Because voting by proxy has largely replaced

attendance at the shareholder meeting as the primary means of corporate suffrage, applying the

Commission’s determinations of whether and what shareholder proposals may properly appear

on a company’s proxy materials effectively alters the corporate voting process. 93

By way of contrast, in the context of director elections, the Commission has facilitated

the ability of shareholders to exercise the voting rights they have under State law. In 2021, the

Commission adopted rules requiring the use of a universal proxy card in non-exempt

solicitations involving director election contests. 94 The foundation for the universal proxy rules

is the right of shareholders—explicit in State law—to vote for the election of directors. 95

Accordingly, the predicate question of whether under State law the proposal (i.e., the election of

directors) is proper for a shareholder vote at the shareholder meeting is clearly answered by

See, e.g., Dyer v. SEC, 266 F.2d 33 (8th Cir. 1959) (stating that Rule 14a-8 “affords a privilege [to have a

proposal included in the company’s proxy statement], which does not otherwise ordinarily exist in favor of

stockholders. Necessarily, the Commission could properly impose reasonable conditions and limitations on the

scope and manner of enjoyment of the privilege, in relation to the other elements of holding stockholder

meetings and conducting corporate affairs.”).

See Fisch 1993 at 1170 (“[T]he SEC’s proxy rules are not passive attempts to implement shareholders’ state

law rights in an increasingly large and impersonal voting system. Instead, the rules change the voting process,

both by determining issues upon which shareholder democracy is appropriate and by structuring the way in

which such democracy can be exercised.”).

See Universal Proxy, Release No. 34-93596 (Nov. 17, 2021) [86 FR 68330 (Dec. 1, 2021)] (“Universal Proxy

Release”). The universal proxy rules do not apply to solicitations involving director election contests for

registered investment companies and business development companies.

See Universal Proxy Release at 68330 (“State statutes require corporations to hold an annual meeting of

shareholders for the purpose of electing directors. A shareholder’s ability to participate in the election of

directors is a fundamental right under state corporate law, and the process by which directors are elected is a

fundamental aspect of corporate governance that is central to maintaining the accountability of directors to

shareholders.”) (footnotes omitted).

State law. 96 To ensure that shareholders voting by proxy are able to participate in the election of

directors in the same manner they could if voting in person at a shareholder meeting, the rule

requires that a proxy card include the names of all duly nominated 97 director candidates

presented for election, 98 thereby allowing shareholders voting by proxy in contested elections to

replicate the vote they could cast if they voted in person. Such an exercise of the Commission’s

rulemaking authority under section 14(a) works in conjunction with State law.

It is not always clear whether a matter is a proper subject for shareholder action under

State law. In some instances, State law entitlements are relatively straightforward. For example,

it is widely recognized that State law generally confers voting rights on equity shareholders in

director elections but does not confer voting rights on bondholders in those elections. 99 In other

instances, applying State law can present difficult interpretive questions, even within a single

jurisdiction. For example, it remains uncertain whether the Delaware General Corporation Law

(“DGCL”) permits precatory proposals; the statute does not speak to the question. 100 These

difficulties are compounded by the fact that States vary in how they address particular

See, e.g., Cal. Corp. Code section 600(b); 8 Del. C. section 211(b); N.Y. Bus. Corp. Law section 602(c).

See Universal Proxy Release at 68331-32 (noting that universal proxy cards “must include the names of all

duly nominated director candidates presented for election by any party . . .” and explaining that “[a] duly

nominated director candidate is a candidate whose nomination satisfies the requirements of any applicable

[S]tate or foreign law provision and a registrant’s governing documents as they relate to director

nominations”).

See 17 CFR 240.14a-19(e).

Compare 8 Del. C. section 212 (granting voting rights to stockholders) with 8 Del. C. section 221 (authorizing

a corporation to grant bondholders rights similar to those held by stockholders, including the right to vote,

because such rights do not exist by default under State law).

100

See Mohsen Manesh, The Corporate Contract & The Private Ordering of Shareholder Proposals, 50 J. CORP.

L. 1, 29 (2024) (noting that the statutory text of the DGCL is silent as to whether shareholders have the right to

make or vote on a precatory proposal) (“Manesh 2024”). See also Kyle A. Pinder, The Non-Binding Bind:

Reframing Precatory Stockholder Proposals Under Delaware Law, 15 MICH. BUS. & ENTREPRENEURIAL L.

REV. 1 (2026), available at: https://repository.law.umich.edu/mbelr/vol15/iss1/2 (concluding that Delaware

law does not provide an inherent precatory proposal right).

governance matters. 101 But section 14(a) does not authorize the Commission to resolve

ambiguous questions of State law or to impose a uniform Federal standard. Indeed, doing so has

inhibited and may continue to inhibit the development of State law by State legislatures and

courts interpreting the law of the relevant States of incorporation, as we discuss below. 102

Absent clear congressional direction to the contrary, State legislatures and courts interpreting

State law are the appropriate bodies to develop and define the scope of shareholder rights.

The Commission has, at times, noted that its authority to promulgate Rule 14a-8 under

section 14(a) was upheld in 1947 in SEC v. Transamerica Corp. 103 But in Transamerica, which

upheld an application of the 1942 version of the rule, the scope of the Commission’s authority

under section 14(a) was not squarely presented or addressed. To the extent the court’s analysis

could be read to endorse a more expansive view of the Commission’s authority than the

101

See Stephen M. Bainbridge, Revitalizing SEC Rule 14a-8’s Ordinary Business Exclusion: Preventing

Shareholder Micromanagement by Proposal, 85 FORDHAM L. REV. 705 (2016) (“[T]here is an unfortunate

degree of inconsistency from state to state as to which actions are deemed extraordinary and which are deemed

ordinary. States are divided, for example, as to whether such basic matters as filing a lawsuit or executing a

guarantee of another corporation’s debts are ordinary or extraordinary.”). While many states have adopted the

MBCA, its adoption is not universal, and some states have adopted it only in part. See American Bar Ass’n,

Bus. Law Section, Model Business Corporation Act Resource Center, available at

https://www.americanbar.org/groups/business_law/resources/model-business-corporation-act/ (noting that 36

jurisdictions have adopted the MBCA in whole or in part).

102

See section II.A.2.b.ii. See also Fisch 1993 at 1192-93 (“The interdependence of the state and federal

regulatory systems has several consequences. First, the mere existence of the federal proxy rules may have

restrained the development of state corporation law in the area of voting regulation. A state statute that

conflicted with the proxy rules might not be valid under the Supremacy Clause. Additionally, the federal rules

subdue state motivation to legislate. State legislatures have become accustomed to leaving the regulation of the

voting process to the SEC and defer to that agency’s expertise. State and federal courts also have grown

accustomed to viewing shareholder proxy rights as those rights defined by the SEC rules. In spite of the SEC’s

statements that its rules simply enable shareholders to realize state law rights, courts are loathe to recognize

ballot access, information, or procedural rights that extend beyond those explicitly guaranteed by federal

law.”).

103

163 F.2d 511 (3d Cir. 1947); see, e.g., Shareholder Proposals Relating to the Election of Directors, Release

No. 34-56161 (July 27, 2007) [72 FR 43488, 43489 n.8 (Aug. 3, 2007)]. But see 1954 Adopting Release

(explaining that “state law is to be the standard of eligibility of a proposal under the rule” and that “[t]he

Commission wishes to make it clear that it considers this standard consistent with [Transamerica]”).

Commission’s interpretation in this release, the Commission disagrees with such a reading for

the reasons discussed above.

d. Rule 14a-8 Should be Rescinded

An administrative agency must act within its statutory authority. 104 As discussed, Rule

14a-8 exceeds the plain and best reading of the Commission’s rulemaking authority under

section 14(a). Accordingly, we propose to rescind the rule. Furthermore, as discussed below,

even if the Commission had the authority to adopt Rule 14a-8 or aspects of the rule, for

independent policy reasons, the Commission is proposing to rescind the rule in its entirety.

We acknowledge that Rule 14a-8 has been in existence for many years and that both

shareholders and companies are likely to have shaped certain governance and engagement

practices around the rule’s provisions. However, agencies may not add to their powers by

adverse possession; longevity is not a substitute for legal authority. Indeed, the passage of time

has seen Rule 14a-8 stray further from section 14’s authorization. That said, to better understand

104

See Bd. of Governors of Fed. Rsrv. Sys. v. Dimension Fin. Corp., 474 U.S. 361, 373 n.6 (1986) (holding that

an administrative agency, in this case the Federal Reserve Board, only has the power “to police within the

boundaries of the [relevant authorizing statute]” and not “to expand its jurisdiction beyond the boundaries

established by Congress”); West Virginia v. EPA, 597 U.S. 697, 723 (2022) (“Agencies have only those

powers given to them by Congress, and ‘enabling legislation’ is generally not an open book to which the

agency [may] add pages and change the plot line.”) (citation omitted); Util. Air Regul. Grp. v. EPA, 573 U.S.

302, 327-328 (2014) (stating that to avoid “a severe blow to the Constitution’s separation of powers,” an

agency must act within the bounds established by Congress and may not rewrite statutory terms “to suit its

own sense of how [a] statute should operate”); City of Arlington v. FCC, 569 U.S. 290, 297 (2013) (“No matter

how it is framed, the question a court faces when confronted with an agency’s interpretation of a statute it

administers is always, simply, whether the agency has stayed within the bounds of its statutory authority.”)

(italics in original); K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988) (“In determining whether a

challenged regulation is valid, a reviewing court must first determine if the regulation is consistent with the

language of the statute.”); Stark v. Wickard, 321 U.S. 288, 309 (1944) (“When Congress passes an Act

empowering administrative agencies to carry on governmental activities, the power of those agencies is

circumscribed by the authority granted.”); Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 398 (D.C.

Cir. 2004) (stating that a Federal agency is a creature of statute, has no constitutional or common law existence

or authority, and has “only those authorities conferred upon it by Congress”) (italics in original) (citation

omitted).

the potential impact of rescinding Rule 14a-8 and possible measures to mitigate such impact, we

are seeking comment on reliance interests in the current rule and on alternatives to complete

rescission that would fall within our authority.

2. Policy Reasons for Rescinding Rule 14a-8

Independent of our lack of statutory authority, there are also policy reasons for

rescinding Rule 14a-8 in its entirety. Specifically, we believe that (i) many of the justifications

that were originally provided to support adoption of Rule 14a-8 either have not been

substantiated in practice or are less compelling today; (ii) Rule 14a-8 has had, and will continue

to have, certain unintended consequences; and (iii) retaining any version of Rule 14a-8—

assuming the Commission were authorized to do so—is unwarranted and unlikely to avoid these

unintended consequences.

a. Many of the original justifications for adopting Rule 14a-8 either have

not been substantiated in practice or are less compelling today

When the Commission first adopted Rule 14a-8, Chairman Purcell stated that the rule

was adopted with the understanding that (i) the cost to companies to include shareholder

proposals in their proxy materials was “small;” 105 (ii) many proposals were either already

supported by management or received meaningful shareholder support; 106 (iii) the overall

volume of proposals was low; 107 and (iv) the rights of shareholders to present certain matters for

105

See Statement of Chairman Purcell (“It is a very small item of expense, so far as the company’s funds are

concerned and one that can very readily and rightfully be used for the purpose, it seems to us.”).

106

See id. at 181 (“Many [shareholder proposals] have been accepted by managements, and others have secured

respectable percentages of the votes cast.”). We were unable to confirm shareholder support rates for these

earlier proposals.

107

See id. (explaining that there had been “no flood of stockholders’ proposals” around the time of the rule’s

adoption).

a vote to their fellow shareholders under State law was reasonably clear, such that the

Commission’s rules could operate to facilitate those rights. 108 As discussed below, many of

these justifications either have not been substantiated in practice or have become less

compelling given the evolution of the shareholder proposal process, and ambiguity about the

scope of shareholder voting rights under State law. In addition to these considerations, other

developments, including the reduced burden in conducting independent solicitations and

availability of other methods of shareholder engagement due to technological advancements,

also may have rendered Rule 14a-8’s original justifications less compelling.

First, the cost to companies of addressing and including shareholder proposals in proxy

materials is no longer small. In response to commenter feedback on the proposing release to the

Commission’s 2020 amendments to Rule 14a-8, the Commission estimated that the cost to a

company ranged from $20,000 to $150,000 per proposal. 109 One recent survey found that the

aggregate direct costs over a four-year period that companies incurred to comply with Rule 14a8 varied widely among 35 public company respondents: 20 percent reported four-year aggregate

direct costs of less than $100,000; 25.7 percent reported between $100,000 and $250,000; and

17.1 percent reported between $251,000 and $500,000. 110 Nearly one-quarter reported

108

See id. (describing a situation in which a company’s chairman ruled a shareholder’s floor proposal out of

order, causing “so much opposition among the assembled stockholders that the chairman rescinded his ruling

and permitted full discussion of the matter” and observing that “the stockholders made it clear that in that

corporation, whether or not they agreed with their fellow stockholders, they believed that every stockholder

should be given an opportunity to present his point of view to his fellow stockholders and to have them express

their own judgment on its merits. This is the right that the State law intended to give stockholders and it is that

right our rules protect and make a reality.”).

109

2020 Adopting Release at 70245 n.63.

110

See Lawrence A. Cunningham, Shareholder Proposal Survey: Report and Analysis of Results, University of

Delaware, John L. Weinberg Center for Corporate Governance (Jan. 2026), at 4, available at

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6045474. The report states that public companies

aggregate, four-year costs exceeding $500,000, including 14.3 percent reporting between

$501,000 and $1,000,000 and 11.4 percent reporting more than $1,000,000 over that period. 111

Another survey found that nearly 20 percent of the 35 responding companies, including some

companies that have small market capitalization, noted that they spend over $500,000 in

external costs addressing shareholder proposals in a typical proxy season. 112

Companies incur costs, including internal time, as well as external legal and compliance

expenditures. 113 Companies also incur indirect costs associated with addressing shareholder

proposals, including internal legal and administrative resources, management time, and

opportunity costs from diverting management’s attention away from core business operations,

which may be substantial. 114 These costs ultimately are borne by the company’s shareholders, 115

responding to this survey were predominantly large capitalization or mega capitalization firms, drawn from

diverse industries. The estimated costs may vary for other types of companies, such as investment companies.

111

See id.

112

See Business Roundtable, The Need for Bold Proxy Process Reform (Apr. 2025), available at

https://www.businessroundtable.org/the-need-for-bold-proxy-process-reforms.

113

See id.

114

See Procedural Requirements and Resubmission Thresholds under Exchange Act Rule 14a-8, Release No. 3487458 (Nov. 5, 2019) [84 FR 66458, 66496 (Dec. 4, 2019)] (“2019 Proposing Release”) (“Shareholder

proposals also impose opportunity costs on companies and their shareholders because management, the board,

and the voting shareholders could spend the time spent on processing a shareholder proposal and voting on the

proposal to engage in other value enhancing activities.”); Mary Jo White, Chair, SEC, Speech at the 69th Nat’l

Conf. of the Soc’y of Corp. Secretaries and Governance Professionals: Building Meaningful Communication

and Engagement with Shareholders (June 25, 2015), https://www.sec.gov/newsroom/speechesstatements/building-meaningful-communication-engagement-shareholde [https://perma.cc/NQ8C-NRRE]

(“Briefing boards [on shareholder proposals], analyzing issues and determining how to communicate the

company’s views to shareholders and markets take time and resources, as does hiring lawyers to analyze the

proper interpretation of the Commission’s grounds for exclusion and preparing communications with the

staff.”).

115

See Substantial Implementation, Duplication, and Resubmission of Shareholder Proposals Under Exchange

Act Rule 14a-8, Release No. 34-95267 (July 13, 2022) [87 FR 45052, 45067 (July 27, 2022)] (“[C]ompanies

may bear both direct costs and opportunity costs associated with the submission of a shareholder proposal, and

these costs may be passed on to shareholders.”); 2020 Adopting Release at 70267 (“[A]ll shareholders may

incur passed-through costs associated with companies’ consideration and processing of shareholder proposals

and experience the economic impact of shareholder proposals that are implemented.”).

who, in addition to absorbing the costs incurred by the company, face their own costs in

analyzing and voting on proposals. 116

Second, most shareholder proposals today do not receive majority shareholder support

and are not supported by management. We estimate that approximately seven percent of

submitted proposals and 11 percent of proposals that were voted on received majority

shareholder support in 2025. 117 It is also clear that management frequently opposes shareholder

proposals today, as reflected in the number of proposals companies exclude from their proxy

materials each proxy season, 118 the number of proposals companies seek to exclude, 119 and the

opposition statements companies routinely include in their proxy materials to rebut proposals

that are included and voted on. 120

Third, the volume of shareholder proposals has increased significantly over time in

comparison to the increase in the number of companies required to file proxy statements. 121 In

contrast to the relatively low number of shareholder proposals included in company proxy

116

See 2020 Adopting Release at 70277 (“[T]he costs to non-proponent shareholders of analyzing and voting on

shareholder proposals are significant.”).

117

See infra section IV.B.3.a.

118

See id. (noting that 22% of proposals were omitted from company proxy materials in 2025).

119

For example, between October 1, 2024 and September 30, 2025, companies sought to exclude approximately

370 proposals. See U.S. Securities & Exchange Commission, Shareholder Proposals, available at

https://www.sec.gov/rules-regulations/shareholder-proposals.

120

See Asaf Eckstein, The Rise of Corporate Guidelines in the United States, 2005-2021: Theory and Evidence,

98 INDIANA L.J. 921 (2023), available at https://www.repository.law.indiana.edu/ilj/vol98/iss3/6/ (stating that

boards choose to recommend against shareholder proposals that are included in a company’s proxy statement

“most of the time”).

121

There were 1,467 proxy statements filed by companies in 1943, see Securities and Exchange Commission,

Thirteenth Annual Report of the Securities and Exchange Commission Fiscal Year Ended June 30, 1947, 42

(1948), available at https://www.sec.gov/about/annual_report/1947.pdf, and we estimate that 6,043 proxy

statements are filed by companies today, see section V.C.

materials between 1943 and 1946, which totaled between 34 and 66, 122 the annual number of

shareholder proposals submitted to companies between 2020 and 2025 is estimated to have

ranged from 697 to 932, with an estimated 437 to 599 proposals included in company proxy

materials each year. 123

Finally, when it adopted Rule 14a-8, the Commission appears to have assumed that it

would be clear, or at least reasonably easy to determine, which matters are proper to present to

shareholders for a vote under State law. However, State law is often unclear or silent as to what

matters may be presented to shareholders. For instance, Delaware law is unclear about the status

of precatory proposals—the most common type of Rule 14a-8 proposal. 124 While section 211 of

the DGCL states that, in addition to the election of directors, “[a]ny other proper business may

be transacted at the annual meeting,” it does not define what can be considered as “proper

business.” 125 Consequently, there is a diversity of opinion about whether the DGCL permits

precatory proposals. While a number of commentators have observed that Delaware law does

not explicitly authorize or contemplate precatory proposals as proper subjects for shareholder

122

See Securities and Exchange Commission, Thirteenth Annual Report of the Securities and Exchange

Commission Fiscal Year Ended June 30, 1947, 42 (1948), available at

https://www.sec.gov/about/annual_report/1947.pdf (noting that the number of shareholder proposals included

in company proxy statements was 66 in 1943, 38 in 1944, 34 in 1945, and 34 in 1946).

123

See Matteo Tonello, 2025 Proxy Season Review: From Escalation to Recalibration, Harv. L. Sch. F. Corp.

Governance (Sept. 15, 2025), available at https://corpgov.law.harvard.edu/2025/09/15/2025-proxy-seasonreview-from-escalation-to-recalibration/ (estimating the total number of shareholder proposal submissions to

be 697 proposals in 2020, 715 in 2021, 801 in 2022, 836 in 2023, 932 in 2024, and 781 in 2025, while

estimating the total number of voted shareholder proposals to be 437 in 2020, 419 in 2021, 538 in 2022, 586 in

2023, 599 in 2024, and 462 in 2025).

124

See supra notes 16 and 100.

125

See 8 Del. C. section 211; see also Model Bus. Corp. Act section 7.01.

action, 126 the question remains unresolved. For example, one scholar of Delaware law has stated

that section 211 of the DGCL could be interpreted to authorize precatory proposals as proper 127

and another legal scholar has argued that the authority to present and vote on precatory

proposals is an “incidental power[]” derived from section 121 of the DGCL and the broader

governance framework created by statute. 128 Regardless of their views, no commentator has

identified any controlling authority from a Delaware court on this issue, and the DGCL (like the

MBCA) does not directly address the question as to whether precatory proposals are proper

subjects for a shareholder vote. 129 Moreover, even if Delaware law were clear on this issue,

other States may take a different position.

The Commission appears to have underestimated the challenges associated with

discerning and applying State corporate law when it adopted Rule 14a-8, leading to subsequent

126

See e.g., Manesh, supra note 100, at 29 (“For one, there is nothing in Delaware’s statute or caselaw

establishing as ‘settled’ public policy the right of shareholders to make or vote on a proposal at a shareholder

meeting. As previously noted, the statutory text of the [Delaware General Corporation Law] makes no

reference to such a right. And to the extent that right is recognized by case law, judicial references to it are

scant and fleeting”); Pinder, supra note 100 (“[T]he Delaware General Corporation Law . . . does not

contemplate (and thus does not expressly authorize) precatory stockholder proposals.”); Unofficial Transcript

of the Roundtable Discussion Regarding the Federal Proxy Rules and State Corporation Law Before the

Chairman and Commissioners of the Securities and Exchange Commission (May 7, 2007), available at

https://www.sec.gov/spotlight/proxyprocess/proxy-transcript050707.pdf (“2007 Proxy Roundtable Transcript”)

comment of Stanley Keller (“14a-8 in and of itself I think has created the non-binding proposal. I think as a

matter of state law it really didn’t exist outside of 14a-8”); cf. Leo E. Strine, Jr., Breaking the Corporate

Governance Logjam in Washington: Some Constructive Thoughts on a Responsible Path Forward, 63 Bus.

Law. 1079, 1088 (2008) (“Strangely, precisely because state corporation laws do not contemplate non-binding

stockholder votes on anything, the SEC has permitted non-binding or ‘precatory’ proposals on virtually

everything, including takeover defenses and executive compensation.”).

127

See 2007 Proxy Roundtable Transcript, comment of Frank Balotti (“I think precatory resolutions are

authorized by [section] 211 [of the DGCL], which says that a stockholder can bring before a meeting anything

that is proper for a stockholder to act on. I believe that it is proper for stockholders to ask directors to do

whatever, as opposed to telling directors to do whatever.”).

128

See Fisch et al., supra note 24.

129

Despite the recent enactment of Tex. Bus. Orgs. Code Ann. section 21.373, Texas law similarly does not

address this question.

efforts to provide clarity through incremental amendments to the rule (such as, for example,

through the current codified presumption regarding precatory proposals 130). However, as

explained in section II.A, when State law is unclear or silent as to what matters can be presented

to shareholders, it is not the Commission’s role to fill those gaps or impose uniformity through

the Federal proxy rules.

In addition to the specific considerations discussed above, other developments also may

have rendered Rule 14a-8’s original justifications less compelling. For example, independent

solicitation may have become less burdensome due to, among other factors, technological and

regulatory advancements, including the introduction of the Commission’s e-proxy rules (i.e.,

notice and access). 131 In 2021, we estimated that the median basic cost of soliciting

shareholders, namely, the proxy distribution fees and postage costs for the first mailing, was

approximately $14,000. 132 We also estimated that the costs of a nominal solicitation—where

dissidents minimize their solicitation efforts and rely on the notice-and-access mechanism—

would fall within a range of $5,300 to $9,800, with the specific cost dependent on the subject

130

See Note to Rule 14a-8(i)(1).

131

See Broadridge, 2025 Proxy Season Key Stats and Performance Ratings (2025), available at

https://www.broadridge.com/campaign/2025-proxy-season-key-stats-and-performance-ratings (noting that

90% of the proxy communications Broadridge processed were digital and that issuers and funds experienced

an estimated $5 billion in cost savings on paper and postage). The Commission’s e-proxy rules require issuers

and other soliciting persons to post their proxy materials on an Internet website and furnish notice of the

materials’ availability to shareholders. The notice and access model was intended to promote the use of the

Internet as a reliable and cost-efficient means of making proxy materials available to shareholders. See

Amendments to Rules Requiring Internet Availability of Proxy Materials, Release No. 33-9108 (Feb. 22, 2010)

[75 FR 9074 (Feb. 26, 2010)].

132

See Universal Proxy Release, at 68359 (the Commission calculated this estimate based on industry data

provided by a proxy services provider for a sample of 31 proxy contests from July 1, 2018 through June 30,

2019).

company’s market capitalization. 133 These estimates assumed that the dissident would meet the

minimum 67 percent solicitation requirement under 17 CFR 240.14a-19 (“Rule 14a-19”), the

Commission’s universal proxy rule, which is not applicable if a shareholder does not solicit

proxies in support of director nominees other than the company’s nominees. 134 While estimating

the total costs of a specific solicitation is challenging due to the variability of discretionary

solicitation expenditures, we believe that technological and regulatory advancements have

helped to facilitate independent solicitations.

In addition, although the original purpose of Rule 14a-8 was not to facilitate shareholder

engagement or communication, shareholders frequently use the rule for these purposes, as

discussed in section II.A.2.b.i below. To the extent shareholders use Rule 14a-8 for these

purposes, technological advancements have given rise to a wide range of alternative channels—

such as online platforms and social media forums—that facilitate communication among

shareholders, enable the expression of shareholders’ views, and allow investors to attempt to

influence corporate behavior. 135 These means were not available when Rule 14a-8 was first

133

See id. at 68359 n.273. See Table IV in section IV.B.3.b for estimates of proxy solicitation costs between 2022

and 2025.

134

Rule 14a-19 requires the use of universal proxy cards by companies and by persons soliciting proxy votes for

their own candidates in contested director elections. The universal proxy card must include the names of all

company and dissident director nominees. Rule 14a-19 establishes certain notice and filing requirements, as

well as formatting and presentation requirements for universal proxy cards, and requires dissidents to solicit at

least 67% of the voting power of shares entitled to vote on the election of directors. Rule 14a-19 does not

apply, however, in a “zero-slate” campaign in which the dissident does not nominate or solicit proxies for its

own director nominees.

135

See, e.g., Donna Fuscaldo, Say Gives Retail Investors A Voice And Tesla Listens, FORBES (Feb. 19, 2019),

available at https://www.forbes.com/sites/donnafuscaldo/2019/02/19/say-gives-retail-investors-a-voice-andtesla-listens/ (describing a digital platform that offers retail investors the ability to engage with companies they

invest in); Seth C. Oranburg, A Little Birdie Said: How Twitter Is Disrupting Shareholder Activism, 20

Fordham J. Corp. & Fin. L. 695, 707 (2015), available at

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2544363 (“Activists can now access virtually all

adopted. Modern technology allows investors—including smaller shareholders—to

communicate both with management and fellow shareholders, mitigating concerns that

rescinding Rule 14a-8 would limit engagement to larger shareholders or those with more access

to management or board members. 136

b. Rule 14a-8 has had, and will continue to have, certain unintended

consequences

i. Rule 14a-8 has become a mechanism for influencing the

interactions between companies and their shareholders in ways

that are inconsistent with the rule’s original purpose

Under Rule 14a-8, a company is required to include a shareholder proposal in its proxy

statement and form of proxy unless it can identify a basis to exclude it, in which case it must file

with the Commission its reasons for exclusion. 137 If a company excludes or attempts to exclude

a proposal, it may be exposed to litigation risk. 138 Proponents may thus use Rule 14a-8 in an

attempt to gain leverage in negotiations with company management or to secure private benefits

shareholders and influence public opinion through social networks, relatively unencumbered by reporting

requirements under SEC rules.”); Taylor Nicole Rogers, Robby Starbuck: the activist pushing U.S. companies

to ditch their DEI vows, FIN. TIMES (Sep. 5, 2024), available at https://www.ft.com/content/0c8974ee-60bf4edb-839c-bc24b8ecbc81 (reporting on how a shareholder uses his social media presence to influence

corporate initiatives).

136

Cf. Fisch et al., supra note 24 (suggesting that eliminating precatory proposals would lead to only those with

large share holdings or personal relationships with board members having access to the board).

137

See supra section II.A.1.c.

138

See, e.g., DiNapoli v. BJ’s Wholesale Club Holdings, Inc., No. 26-cv-11075, 2026WL1762143 (D. Mass. Apr.

22, 2026); Heritage Found. & Am. Conservative Values ETF v. Airbnb, Inc., 1:25-cv-00676 (D.Del. Feb. 12,

2026).

from such negotiations. 139 Use of Rule 14a-8 in this way represents a departure from the rule’s

original purpose and implicates matters more appropriately addressed by State law.

For example, proponents may submit proposals to initiate a dialogue with a company

when they have little or no intent for their proposals to actually be included in company proxy

materials and voted on by fellow shareholders. In fact, many shareholder proposals today are

resolved without a shareholder vote, suggesting that the Rule 14a-8 process has deviated from

its original purpose. 140 For instance, based on available data, proponents withdrew their

proposals at rates ranging from 18.4 percent to 32.1 percent during the four-year period between

2021 and 2025, with approximately 18 percent of proposals being withdrawn in 2025. 141

Companies and proponents alike may have incentives to settle privately, rather than proceed to

a shareholder vote. 142 For companies, the perceived advantages of private resolution may

include reducing reputational risk associated with proposals, mitigating litigation risk related to

statements made in opposition or in connection with exclusion, or avoiding the potentially

139

See Sarah C. Haan, Shareholder Proposal Settlements and the Private Ordering of Public Elections, 126 Yale

L.J. 262, 298-299 (2016) (stating that shareholder proponents are incentivized to negotiate settlements because

they “may extract private benefits from settlements” and that they may “bring a proposal solely for the purpose

of bargaining it away, or to put pressure on management to accede to a different demand”).

140

See id. at 293 (“[I]n virtually all cases, the private settlement of a proposal undercuts the basic justifications for

the shareholder-proposal framework under Rule 14a-8.”).

141

See Subodh Mishra, 2025 U.S. Governance Post-Season Review Evolving Priorities in a Shifting Landscape,

ISS STOXX, Harv. L. Sch. F. Corp. Governance (Oct. 15, 2025), available at

https://corpgov.law.harvard.edu/2025/10/13/2025-u-s-governance-post-season-review-evolving-priorities-in-ashifting-landscape/ (explaining that, of proposals submitted from Jan. 1 to June 30, 2025, 58% were voted on,

23.6% were omitted from the proxy statement, and 18.4% were withdrawn or not presented). Note that these

numbers do not represent the full scope of withdrawn proposals, such as proposals that were withdrawn before

companies filed no-action requests to exclude them from their proxy materials.

142

Cf., e.g., Ross Kerber, This conservative activist is no fan of Trump’s SEC, REUTERS.COM (Mar. 4, 2026),

available at https://www.reuters.com/markets/us/this-conservative-activist-is-no-fan-trumps-sec-2026-03-04/

(quoting a shareholder proponent as saying, “[C]ompanies hate shareholder proposals. They’re a nuisance to

them. Usually somebody’s bringing it because they have a criticism of the company and they just, they want to

do everything they can that’s possible to get the proponent to withdraw. So if they can work out some kind of

minimally painful step to [get] us to withdraw, they do it.”).

greater costs associated with either including a proposal in the proxy materials or seeking to

exclude it under the Commission’s rules. 143 For proponents, reaching a settlement can provide a

more certain path to achieving a tangible outcome since shareholder proposals are typically nonbinding even when they receive majority support. 144 The frequent withdrawal of shareholder

proposals as part of the Rule 14a-8 process does not fully align with Congress’s intent that

section 14(a) and the Federal proxy rules promote “fair corporate suffrage.” 145 Rather than

having their proposals reach a shareholder vote through the proxy process, proponents often

utilize the existence of the rule as leverage for private negotiations with companies, while

company management may also find it advantageous when proposals are withdrawn. 146

Furthermore, Rule 14a-8 can serve as a mechanism for shareholder proponents to

advance interests that in many cases may not be shared by a company’s shareholders at large.

For instance, in 2025, only 56 out of 786 submitted proposals (seven percent) received majority

143

See Haan, supra note 139, at 293-297; see also Kobi Kastiel and Yaron Nili, The Giant Shadow of Corporate

Gadflies, 94 So. Cal. L. Rev. 569, 617 (2021).

144

See Nickolay Gantchev & Mariassunta Giannetti, The Costs and Benefits of Shareholder Democracy, Eur.

Corp. Governance Inst. (Nov. 2019), available at

https://www.ecgi.global/sites/default/files/working_papers/documents/finalgantchevgiannetti_2.pdf

(“Gantchev Article”) (noting that an “overall low implementation rate” of approximately 16% of proposals

“indicates that management may choose not to implement proposals even when they are approved by a

majority of the voting shareholders”); see also John G. Matsusaka et al., Can Shareholder Proposals Hurt

Shareholders? Evidence from Securities and Exchange Commission No-Action -Letter Decisions, 64 J.L. &

Econ. 107, 110 (2021), available at https://www.journals.uchicago.edu/doi/epdf/10.1086/710828 (“When a

proposal is withdrawn, it often means that the company granted some concession to the proponent, who in

exchange withdrew the proposal.”).

145

H.R. Rep. No. 1383, 73d Cong., 2d Sess. 13 (1934).

146

See., e.g., Ross Kerber, Shareholder activist Behar says Trump is ‘disassembling capitalism,’ Reuters.com

(Jan. 21, 2026), available at https://www.reuters.com/sustainability/sustainable-finance-reporting/shareholderactivist-behar-says-trump-is-disassembling-capitalism-2026-01-21/ (quoting a shareholder proponent as saying

“Most companies will have a dialogue. There are those where you have to escalate by filing a resolution, about

half of those then say, ‘OK, if you withdraw it, we'll take some action.’ Then there are the really resistant ones,

about 25% or so, that you have to go to a vote…We’ve had some of our biggest wins at 6% (support), we’ve

had some of our biggest losses at 80%. We want to bring forth new ideas.”).

support. 147 In addition, a significant proportion of shareholder proposals are submitted by a

small number of proponents who advance substantially similar proposals across numerous

companies. 148 In 2025, 10 shareholder proponents submitted an aggregate of 58 percent of all

proposals (455 out of 786). 149

Such use is counter to how the Commission intended the rule to be used. For example,

when the rule was first adopted, Chairman Purcell explained, “[I]f [a shareholder proponent]

were going to use the corporate proxy machinery for making a stump speech for some political

party, that obviously is without the spirit of [the rule] . . . .” 150 The Commission also

subsequently noted that it did not intend for the rule to be used as a “publicity mechanism” for

advancing personal or partisan interests unrelated to the interests of a company’s

147

The data cover proposals submitted for meetings held in calendar year 2025. Data is retrieved from the FactSet

SharkRepellent Proxy Proposal dataset, which includes around 5,000 U.S.-incorporated public companies and

some foreign-incorporated companies. Unless otherwise specified, we exclude from our analysis shareholder

proposals that are not subject to Rule 14a-8, such as proposals related to proxy contests and other proposals

appearing in dissident shareholders’ proxy soliciting material, proposals that were raised from the floor of the

annual or special meetings and were not submitted to appear in the companies’ proxy statements, and

proposals submitted for a vote at meetings of foreign private issuers, as defined in 17 CFR 240.3b-4, which are

not subject to the Federal proxy rules. See section IV.B.3.a.

148

See Gantchev Article supra note 144 (“The press has widely reported that a small group of individuals, often

referred to as corporate gadflies, submits a disproportionate number of proposals. These individual sponsors,

such as John Chevedden and William Steiner, do not acquire large stakes and are not particularly wealthy, but

submit dozens of shareholder proposals every year, convinced that ‘it is the right thing to do.’”); see also Kobi

Kastiel and Yaron Nili, The Giant Shadow of Corporate Gadflies, 94 So. Cal. L. Rev. 569, 591 (2020)

(reporting that five individual investors accounted for almost 40% of shareholder proposals submitted to S&P

500 companies in 2018). See section IV.B.3.a.

149

See supra note 147 for source of the data.

150

See Statement of Chairman Purcell.

shareholders. 151 Yet Rule 14a-8 often serves as a stump from which, figuratively, a small

number of shareholders give speeches. 152

Furthermore, since Rule 14a-8 includes substantive and procedural bases that companies

may use to exclude proposals that otherwise may be permitted under State law, companies may

seek to use the rule to exclude proposals they disfavor or to limit shareholder involvement in

corporate affairs. The various default positions, bases for exclusion, and eligibility criteria have

made Rule 14a-8 a contested vehicle for influencing corporate governance practices and other

corporate behavior. However, the allocation of power between shareholders and management,

as well as determinations about the appropriate role of shareholder advocacy in corporate

governance, are matters for the States to resolve and not the appropriate province of the

Commission. 153

151

See, e.g., 1982 Proposing Release at 47422 n.8 (explaining that “the rule was not designed to burden the proxy

solicitation process by requiring the inclusion” of proposals submitted by proponents “us[ing] the rule as a

publicity mechanism to further personal interests that are unrelated to the interests of security holders as

security holders”).

152

See, e.g., Business Roundtable, supra note 112 (“One repeat proponent openly stated they would not withdraw

their proposal, not due to company-specific concerns, but because keeping it on the proxy statement provided a

larger platform for their cause.”).

153

See Fisch 1993 (explaining that Rule 14a-8 permits shareholder proposals to be excluded from company proxy

materials for reasons that are not grounded in State law, discussing the rule’s role in shaping corporate

governance, and describing the role of Federal and State law in regulating proxy solicitations and shareholder

voting).

ii. The existence of Rule 14a-8 places the Commission in the

position of making judgments about the application of State law

that are best left to other actors

In our experience, Rule 14a-8 has drawn the Commission into matters that should be

addressed by State legislatures, courts, and, if permitted by relevant State law, companies. 154

Although certain aspects of State law may be clear—for example, State law generally affords

shareholders the right to elect directors 155 and amend the bylaws 156—many other areas contain

gaps, ambiguities, or conflicting interpretations. State legislatures and courts—not the

Commission—are the appropriate authorities to resolve those gaps, ambiguities, and conflicts.

Similarly, it is not the Commission’s role to synthesize potentially conflicting State laws for

purposes of administering the Federal proxy rules. For example, State corporate codes are silent

as to whether precatory proposals are proper to present for a shareholder vote. 157 Historically,

however, in assessing whether a proposal is a proper subject for shareholder action under State

law, the Commission has assumed precatory proposals are presumptively proper. 158 The

Commission cannot provide definitive answers to State law questions. Such questions are

154

See Alan R. Palmiter, The Shareholder Proposal Rule: A Failed Experiment in Merit Regulation, 45 Ala. L.

Rev. 879, 910 (1994) (citing then-Commissioner Richard Roberts who stated that “it is neither fair nor

reasonable to expect securities experts to deduce the prevailing wind on public policy issues that have yet to be

addressed by Congress in any decisive fashion.”).

155

See, e.g., Julian Velasco, The Fundamental Rights of the Shareholder, 40 U.C. Davis L. Rev 407 (2006),

available at https://scholarship.law.nd.edu/cgi/viewcontent.cgi?article=1314&context=law_faculty_scholarship

(noting that the right to elect directors is a fundamental right of shareholders); 8 Del. C. section 109(a) (“the

power to adopt, amend or repeal bylaws shall be in the stockholders entitled to vote.”).

156

See Albert H. Choi et al., Contractarian Theory and Unilateral Bylaw Amendments, 104:1 Iowa L. Rev 1, 36

(2018), available at https://ssrn.com/abstract=3024873 (stating that under both the MBCA and DGCL, the

shareholders’ right to amend bylaws cannot be restricted).

157

See, e.g., supra note 100.

158

See supra section II.A.1.c.

properly decided by courts, with the highest court in each State exercising final authority on

questions of State law. 159 More generally, we do not believe that section 14(a) authorizes the

Commission to direct or influence substantive corporate governance matters that fall within the

purview of State legislatures, courts, and the private ordering mechanisms established in a

company’s governing documents.

The continued existence of a Federal rule governing shareholder proposals—even one

that purports facially to defer to State law—encourages companies and shareholders to look to

the Commission to resolve ambiguities in the application of such rule. Moreover, because the

Commission has authority to bring actions to enforce compliance with the proxy rules,

including Rule 14a-8, companies inevitably turn to the Commission and its staff for guidance on

the application of the Federal rule. 160 As a result of the foregoing, State authorities who are the

appropriate bodies to resolve corporate governance matters may have little incentive or occasion

to provide clarity on the role of shareholder proposals. This dynamic is reflected in the fact that,

with the recent exception of Texas, 161 no State has adopted legislation governing shareholder

proposals in more than 80 years since Rule 14a-8 was first adopted, and we are not aware of any

companies that have incorporated their own framework for addressing shareholder proposals

159

See Fidelity Union Trust Co. v. Field, 311 U.S. 169, 177 (1940). Decisions by courts, not the Commission,

provide precedent that proponents and companies may appropriately rely on going forward.

160

As discussed in section IV.B.3.a, during the 2022-2025 period, companies submitted 1,073 no-action requests

to the Commission to exclude shareholder proposals submitted under Rule 14a-8 (corresponding to 33 percent

of all proposal submissions).

161

See Tex. Bus. Orgs. Code Ann. section 21.373 (for eligible publicly traded companies that opt in, requiring a

shareholder or group of shareholders to hold a minimum amount of a company’s securities for a minimum

amount of time, and to solicit a minimum percentage of shares entitled to vote on the proposal, in order to

submit a matter for a shareholder vote).

into their governing documents. 162 Under the proposed rescission of Rule 14a-8, the

Commission would continue to oversee the Federal proxy process but would no longer

determine which shareholder proposals must be presented to shareholders through a company’s

proxy materials. Removing the Commission from the shareholder proposal process would

ensure that the appropriate bodies—i.e., State legislatures, courts, and, when permitted by

relevant State law, companies—determine the circumstances under which proposals should be

included in a company’s proxy materials.

iii. The presence of a Federal rule has inhibited the development of

State law and private ordering

Although States can enact laws determining the appropriate role of shareholder

proposals and establishing whether and to what extent shareholders have access to company

proxy materials for their proposals, they have largely declined to do so. As discussed above,

Rule 14a-8 was not intended to displace State law; rather, it was originally designed to facilitate

State law rights through a Federal disclosure and proxy solicitation framework. 163 Although the

rule has evolved over time in ways that stray from this original intent, a remnant of this

principle remains in Rule 14a-8(i)(1), which expressly permits companies to exclude proposals

that are “not a proper subject for action by shareholders under the laws of the jurisdiction of the

company’s organization.” 164 Accordingly, where State law sets forth standards governing which

proposals may be presented for a vote of shareholders, a proposal not meeting those standards is

162

We are, however, aware of a small number of companies that have recently opted into Tex. Bus. Orgs. Code

Ann. section 21.373.

163

See section II.A.1.a.

164

17 CFR 240.14a-8(i)(1).

excludable under Rule 14a-8(i)(1) as “not a proper subject for action by shareholders.” 165

Similarly, if permitted by State law, companies can adopt standards in their governing

documents, such as establishing company-specific ownership thresholds for presenting

proposals for shareholder action or limits on the types of proposals that may be presented, and a

proposal not complying with those requirements could be excluded under Rule 14a-8(i)(1). 166

For example, if State law or a company’s governing documents (if permitted by State law) were

to disallow precatory shareholder proposals, then a company may exclude such precatory

proposals pursuant to Rule 14a-8(i)(1).

Although current Rule 14a-8(i)(1) accommodates the ability of States and their

domiciled companies to tailor the shareholder proposal process to reflect their own views about

the optimal approach to corporate governance and the particular circumstances of the company

and its shareholders, States and companies have, with one notable exception, generally declined

to exercise this authority to date. 167 This reluctance may stem from concerns that adopting

165

See Shareholder Proposals Relating to the Election of Directors, Release No. 34-56914 (Dec. 6, 2007) [72 FR

70450 (Dec. 11, 2007)] (“With respect to subjects and procedures for shareholder votes, most state corporation

laws provide that a corporation’s charter or bylaws can specify the types of proposals that are permitted to be

brought before the shareholders for a vote at an annual or special meeting. Rule 14a-8(i)(1) supports these

determinations by providing that a proposal that is not a proper subject for action by shareholders under the

laws of the jurisdiction of the corporation’s organization may be excluded from the corporation’s proxy

materials.”); see also Shareholder Proposals Relating to the Election of Directors, Release No. 34-56161 (July

27, 2007) [72 FR 43488, 43490 (Aug. 3, 2007)] (same).

166

See supra notes 161 and 162.

167

But see supra notes 161 and 162. We also note that companies have sought to exclude shareholder proposals

based on limitations in their governing documents about what matters shareholders may vote on. See, e.g.,

Senior Hous. Props. Tr., SEC Staff No-Action Letter, 2019 WL 530450 (Mar. 13, 2019) (agreeing with the

company that a proposal could be omitted from the proxy statement under 17 CFR 240.14a-8(b), which,

among other things, requires a proponent to hold “securities to be entitled to vote on the proposal,” because the

company’s governing documents limited the matters shareholders could vote on and the proposal dealt with a

matter that was not within the enumerated list of matters as to which shareholders were entitled to vote on);

RAIT Financial Trust, SEC Staff No-Action Letter, 2017 WL 373305 (Mar. 20, 2017) (similar); Scripps

Networks Interactive, Inc., SEC Staff No-Action Letter, 2016 WL 390053 (Jan. 14, 2016) (agreeing with

standards that deviate from those in Rule 14a-8 could bring unwanted public attention and

criticism from investors and other parties. In this regard, State authorities may be disinclined to

undertake politically contentious decisions and companies may fear that adopting such

standards could lead to accusations of disenfranchising shareholders, trigger organized investor

campaigns, and/or result in voting recommendations against board nominees by proxy advisory

firms. Indeed, simply being singled out as insufficiently responsive to a perceived shareholder

right could impose reputational costs for companies. 168 Despite the capacity of States to enact

laws and companies to engage in private ordering under Rule 14a-8(i)(1), there have been only

limited efforts to tailor the modern shareholder proposal regime. 169

In addition, despite prior Commission statements to the contrary, 170 some uncertainty

may exist as to whether States and companies can establish shareholder proposal standards that

differ from those set forth in Rule 14a-8. 171 Part of this uncertainty may stem from an early

judicial decision—SEC v. Transamerica Corp. 172—which some have interpreted as holding that

exclusion of a proposal where the company had multiple classes of stock and the proponent owned a class of

common shares that were not entitled to vote on the proposal).

168

See Manesh 2024 (“The risk of political backlash, resistance among investors, and other practical

considerations may lead some, perhaps most, companies to leave shareholder proposal rights untouched.”).

169

See supra note 161 and accompanying text.

170

See supra note 165; but see 1982 Proposing Release. By proposing, in the 1982 Proposing Release, a new rule

that would have allowed companies and their shareholders to establish customized requirements for submitting

and including shareholder proposals in the company’s proxy materials—subject to shareholder approval,

periodic reapproval, and potentially certain minimum ownership and other requirements—the Commission

may have suggested that the Federal rule preempts State law.

171

See, e.g., Elizabeth Ising, Ronald Mueller & Julia Lapitskaya, Considerations for Shareholder Proposals in a

Post-Rule14a-8 World, Harv. L. Sch. F. Corp. Governance (June 15, 2026), available at

https://corpgov.law.harvard.edu/2026/06/15/considerations-for-shareholder-proposals-in-a-post-rule-14a-8world/#10 (“As Rule 14a-8 has increasingly contained provisions that are not reflected in state corporate laws,

it has become unclear whether and to what extent Rule 14a-8 preempts state law.”).

172

163 F.2d 511 (3d Cir. 1947).

Rule 14a-8 preempts State law and privately ordered procedures governing the submission of

shareholder proposals. 173 Rescinding Rule 14a-8 would eliminate any implication of preemption

stemming from Transamerica or otherwise and thus remove that potential disincentive for

States to develop their own laws governing shareholder proposals. To the extent some believe

that Rule 14a-8 currently preempts State law, we expect that if the rule were rescinded, States

and/or companies, in compliance with State law, would be more inclined to adopt their own

standards for when shareholder proposals must be included in, or may be excluded from, the

company’s proxy materials.

Finally, we note that, to the extent State law or a company’s governing documents were

to require inclusion of a shareholder proposal in a company’s proxy statement, the company

would be required to comply with the Commission’s proxy rules with respect to that proposal.

c. Retaining Rule 14a-8 is unwarranted and unlikely to avoid unintended

consequences

Even if the Commission had authority to retain some version of Rule 14a-8, doing so

would require the Commission to establish certain baseline assumptions, such as whether

shareholder proposals should, by default, be included in or excluded from a company’s proxy

materials. Whatever default rule the Commission were to select—inclusion or exclusion—

would establish the starting point for how disputes are resolved. The rule also would have to

articulate what a company or a shareholder must do to opt out of the default. In doing so, the

rule necessarily would advantage one side over the other by shaping the burdens of persuasion

173

See, e.g., Jill Fisch, The Transamerica Case, THE ICONIC CASES IN CORPORATE LAW (Jonathan Macey, ed.

2008) (stating that the court “concluded that any issuer-specific limitations on the shareholder voting power

conferred by [Rule 14a-8] were improper”).

and the practical likelihood of success. Such a structural choice, even if made with the intention

of neutrality, would have the practical effect of shaping how companies and shareholders

interact, negotiate, and ultimately view the costs and utility of the shareholder proposal process.

Even if the Commission could attempt to amend the rule to completely defer to State

law, in practice we do not believe such an alternative would address our fundamental concern

about the Commission’s entanglement in State law issues. So long as a Federal rule remains,

experience has shown that parties will continue to look to that rule—and the Commission—to

resolve questions about the inclusion of shareholder proposals in a company’s proxy materials

given the greater uniformity offered by a Federal framework and notwithstanding the fact that

State law determines the proper scope of a shareholder’s power to present a proposal to their

fellow shareholders for a vote. 174 The history of Rule 14a-8 underscores this dynamic as, over

time, the Federal rule has become the primary reference for determining the scope, operation,

and limits of shareholder proposals, effectively displacing the authority of State law

notwithstanding the Commission’s disclaimers of any intention to do so. Thus, even if the

Commission had the authority to retain a version of Rule 14a-8—with the clear intention of

deferring to State law—over time it would inevitably be drawn into matters that should be left

to States or private ordering.

In addition, we do not believe that retaining such a version of Rule 14a-8 would be

warranted. We expect that total rescission of the rule would lead the States and/or (where

authorized by State law) companies to be more inclined to adopt their own standards in this

area. State courts are the proper venue to resolve any disputes that may arise directly based on

174

See supra note 102.

State law and the terms of corporate governance documents, without need for a Federal rule that

would itself necessarily incorporate State law (and risk overriding it). Accordingly, we believe

it is prudent for the Commission to defer to States and companies to determine if, and under

what circumstances, shareholder proposals must be included in company proxy materials. 175

3. Investment Company Considerations

Section 20(a) of the Investment Company Act includes substantially the same language

as section 14(a) but relates to proxies, consents, or authorizations in respect of any security

issued by registered investment companies. The Commission has used the authority under

section 20(a) of the Investment Company Act to adopt a rule that requires any proxy, consent,

or authorization with respect to any security issued by a registered investment company to

comply with the rules and regulations adopted pursuant to section 14(a) of the Exchange Act. 176

As a result, registered investment companies are subject to Rule 14a-8 regardless of whether

they have a class of equity securities registered under section 12 of the Exchange Act.

175

To the extent the Commission has previously suggested that the mere omission of a shareholder proposal from

a company’s proxy materials could render those materials materially false or misleading in the absence of a

rule like Rule 14a-8, we disagree. Cf. Statement of Chairman Purcell (“The proxy statement purports to tell the

stockholders everything that is going to be taken up at the meeting. The management knew [shareholder]

proposals were going to be taken up at the meeting. It knew that it intended to oppose them. Any [proxy]

statement which did not include those proposals and the position of the management was obviously

misleading, because the soliciting material purported to tell the stockholders everything that is going to be

taken up at a meeting that management knew about.”). The omission of a shareholder proposal from a

company’s proxy materials or the failure to disclose that it will be considered at the meeting is generally not,

without more, materially false or misleading. Cf. Heinze v. Tesco Corp., 971 F.3d 475 (5th Cir. 2020)

(rejecting a pure-omissions theory under Rule 14a-9); cf. also Basic v. Levinson, 485 U.S. 224, 239, n.17

(1988) (“Silence, absent a duty to disclose, is not misleading under Rule 10b-5.”); Macquarie Infrastructure

Corp. v. Moab Partners LP, 601 U.S. 257, 266 (2024) (holding that pure omissions are not actionable under

Rule 10b-5(b)). There could, however, be situations where the failure to disclose a shareholder proposal could

be false and misleading under the circumstances. If, for example, management were to state that it was

unaware of any other business to come before the meeting when it had in fact been advised that a shareholder

intended to present a matter, such statement may be materially false and misleading in the context of soliciting

discretionary voting authority for such matter.

176

17 CFR 270.20a-1.

We are proposing to rescind Rule 14a-8 for all companies, including registered

investment companies and business development companies 177 (together, “regulated funds”).

We recognize that the regulatory framework for regulated funds is different from that of other

companies that have a class of equity securities registered under section 12 of the Exchange Act

(“operating companies”). In particular, the Investment Company Act provides regulated fund

shareholders with voting rights that are independent of State law corporate governance

provisions. 178 For example, section 18(i) of the Investment Company Act requires that, with

limited exceptions, every share of investment company stock must “be a voting stock and have

equal voting rights with every other outstanding voting stock.” 179 In addition, several provisions

of the Investment Company Act require shareholder approval by vote on matters such as

changes to an investment company’s fundamental investment policies, approval of an

investment company’s advisory contract, or certain director elections. 180 Moreover, any

investment advisory agreement with a regulated fund must provide that it may be terminated at

any time by vote of a majority of the outstanding voting securities. 181

177

Business development companies are a category of closed-end investment company that do not register under

the Investment Company Act but rather elect to be subject to the provisions of sections 55 through 65 of the

Investment Company Act. See section 2(a)(48) of the Investment Company Act [15 U.S.C. 80a-2(a)(48)].

178

See New Germany Fund, SEC No-Action Letter (May 8, 1998) (the Commission declined to provide a noaction position with respect to a fund’s request to exclude a shareholder proposal to terminate the fund’s

advisory agreement based on the argument that State law vested in the board exclusive authority to terminate

the agreement and noted that “Section 15(a)(3) of the [Investment Company] Act confers independent

authority on the Fund’s shareholders to terminate the Fund’s investment advisory agreement at any time”).

179

15 U.S.C. 80a-18(i). See also 15 U.S.C. 80a-18(a) (providing an exception for specific voting rights of holders

of any senior security of a closed-end fund that is stock, e.g., preferred stock).

180

See, e.g., 15 U.S.C. 80a-13, 80a-15, 80a-16. Business development companies are subject to some of these

shareholder voting requirements to the same extent as registered investment companies and have some

separate shareholder voting requirements under the Investment Company Act. See, e.g., 15 U.S.C. 80a-57,

80a-58.

181

15 U.S.C. 80a-15(a), 80a-58 (applying section 15(a) to a business development company to the same extent as

if it were a registered closed-end investment company).

The proposed rescission of Rule 14a-8 would not affect the status or applicability of

these statutory voting rights. 182 The fact that Congress established voting rights in these

instances, however, does not alter the scope of the Commission's authority over the solicitation

of proxies. 183 While section 20(a) of the Investment Company Act, like section 14(a) of the

Exchange Act, provides authority to regulate the proxy solicitation process, section 20(a) does

not empower the Commission to expand upon or restrict the scope of shareholder voting

rights. 184 By establishing standards for when a shareholder proposal must be included in, or may

be excluded from, a company’s proxy materials that are neither grounded in State law nor

authorized by other statutory provisions, Rule 14a-8 effectively dictates the scope of

shareholder voting rights at regulated funds. Thus, Rule 14a-8 exceeds the scope of the

Commission’s authority to regulate the proxy solicitation process with respect to regulated

funds just as with respect to operating companies.

Apart from legal authority considerations, we recognize that regulated funds’

experiences with shareholder proposals differ in some respects compared to operating

companies. For example, regulated funds generally receive fewer shareholder proposals than

other types of companies and, on average, the shareholder proposals that regulated funds receive

182

For example, following any rescission of Rule 14a-8, proponents wishing to terminate an advisory agreement

would remain free to present a proposal to that effect at a meeting of shareholders or conduct an independent

proxy solicitation with respect to such a proposal.

183

Indeed, the fact that Congress mandated certain voting rights for shareholders of regulated funds under the

Investment Company Act only underscores that when Congress intends to intervene in corporate governance

matters, it does so expressly.

184

For the avoidance of doubt, this release addresses the scope of the Commission’s authority to regulate the

proxy solicitation process under section 14(a) of the Exchange Act and section 20(a) of the Investment

Company Act. It does not relate to or address the scope of any other authorities available to the Commission

under those statutes.

gain higher levels of shareholder support. 185 In addition, open-end investment companies and

unlisted closed-end investment companies generally do not hold shareholder meetings annually,

reducing the likelihood of shareholder proposals in proxy materials in any given year for these

companies. While these considerations may mean that including shareholder proposals in proxy

materials may be less costly for regulated funds than for other types of companies, we also

understand that general costs associated with proxy solicitations may be different for regulated

funds than for other types of companies. For example, obtaining sufficient votes on regulated

fund proxy matters can present challenges because these funds often have diffuse, retailoriented shareholder bases. 186 Given the unique considerations that apply with respect to the

proxy process for regulated funds, we are soliciting comment below on whether to take a

different approach to shareholder proposals for these funds.

Request for Comment

1. Should Rule 14a-8 be rescinded as proposed? Why or why not? Are there alternative

approaches within the scope of the Commission’s authority we should consider that would

adequately address our policy concerns with respect to Rule 14a-8?

2. Do companies and proponents have reliance interests in Rule 14a-8 that should be

considered? If so, what are those interests and how can we balance the need to address the

Commission’s authority concerns with the potential effects on affected parties?

185

See infra section IV.B.3.a.

186

See, e.g., Confronting Growing Burden of Fund Proxy Campaigns, Investment Company Institute (Mar. 2026),

available at https://www.ici.org/system/files/2026-03/26-confronting-growing-burden-fund-proxycampaigns.pdf.

3. To what extent have the original justifications for adopting Rule 14a-8 been or not been

substantiated in practice given the evolution of the shareholder proposal process?

4. To what extent have costs to registrants associated with Rule 14a-8 (such as the costs of

addressing and including shareholder proposals), the volume of shareholder proposals, and

the degree of shareholder support changed since the adoption of Rule 14a-8?

5. As discussed above, in many cases, State law is unclear or silent as to whether particular

types of proposals, including precatory proposals, are proper subjects for action by

shareholders in a given jurisdiction. Is this an accurate assessment of the current status of

State law as it pertains to shareholder proposals? Are there any additional observations or

analyses regarding State law that we should consider?

6. To what extent have recent developments, including the potentially lower burdens of

independent solicitation campaigns and the emergence of alternative shareholder

engagement channels, weakened the original justifications for a Federal shareholder

proposal rule? To what extent have costs to proponents associated with conducting an

independent solicitation changed since the adoption of Rule 14a-8?

7. As discussed above, Rule 14a-8 has had certain unintended consequences, such as becoming

a mechanism for influencing interactions between companies and their shareholders and

potentially inhibiting the development of State law and private ordering. Are there

alternatives to full rescission within the Commission’s authority that would avoid these

unintended consequences? If so, how could the Commission retain a Federal rule on

shareholder proposals without becoming entangled in State law issues?

8. If Rule 14a-8 is rescinded as proposed, would States and, where authorized by State law,

companies be more likely to set their own standards and requirements regarding shareholder

proposals? If so, what would be the advantages and disadvantages? If not, what would be

the advantages and disadvantages?

9. If Rule 14a-8 is rescinded, what are the most likely forms of State and private ordering that

would develop? For example, would States adopt uniform standards applicable to all

companies organized in their jurisdiction, or would they instead enable companies to

establish their own standards? If the latter, would a market-wide standard likely develop or

would companies largely adopt their own individual standards?

10. What impact would rescission of Rule 14a-8 together with the proposed amendments to

Rule 14a-4 (described in section II.B, below) have on shareholders and shareholder voting

rights under State law?

11. If the Commission rescinds Rule 14a-8 as proposed, should the Commission provide

guidance regarding any other relevant rules adopted pursuant to section 14? If so, which

rules?

12. Would rescinding Rule 14a-8 have different effects on regulated funds and their

shareholders than it would on other companies and shareholders?

13. Should we rescind Rule 14a-8, including for regulated funds, as proposed, or should we take

a different approach to shareholder proposals for regulated funds? For example, should we

adopt a new rule under the Investment Company Act that addresses inclusion in regulated

funds’ proxy materials of shareholder proposals relating to matters on which the Investment

Company Act provides shareholder voting rights? If so, are there additional requirements or

conditions that should be included in such a rule that would be within the scope of our

authority to regulate the proxy solicitation process?

B. Proposed Amendments to Rule 14a-4(c)

1. Overview of Current Rules Related to Discretionary Voting Authority

Historically, few shareholders of companies with a class of equity securities registered

under the Exchange Act attend shareholder meetings to vote in person. Instead, the most

common way by which shareholders learn about matters to be voted on at a shareholder meeting

and vote on such matters is through the proxy process. 187 State corporate law generally

authorizes the use of proxies to permit shareholders to vote through a representative without

attending the shareholder meeting. 188 Parties soliciting proxy authority to vote Exchange Actregistered securities on behalf of shareholders entitled to vote at the meeting must comply with

the Federal proxy rules pursuant to section 14 of the Exchange Act. 189

Currently, the Federal proxy rules provide shareholders two methods to present

proposals for consideration by company shareholders voting by proxy at a shareholder meeting.

First, a shareholder may seek inclusion of its proposal in the company’s proxy materials in

accordance with Rule 14a-8. 190 Second, a shareholder may submit its proposal to the company

pursuant to the company’s governing documents 191 and conduct its own proxy solicitation for

its proposal, at the shareholder’s expense, using its own proxy materials.

187

See supra note 8.

188

See, e.g., 8 Del. C. section 212(b) (“Each stockholder entitled to vote at a meeting of stockholders . . . may

authorize another person or persons to act for such stockholder by proxy . . . .”); Model Bus. Corp. Act section

7.22(a) (“A shareholder may vote the shareholder’s shares in person or by proxy.”).

189

15 U.S.C. 78n(a).

190

See supra section II.A.

191

State law generally requires that, where a company has advance notice bylaw provisions, a proposal comply

with those provisions. Advance notice bylaws generally provide procedural and informational requirements

that shareholders must satisfy to submit valid director nominations or other proposals at a shareholder meeting,

The company has two means to vote shares represented by proxies it receives from

shareholders on a given matter, including a shareholder proposal. The company may seek direct

voting authority for a proposal included in the company’s proxy statement and form of proxy

(i.e., proxy card), in which case the company would receive direction as to how to vote on the

proposal from the selection made (e.g., “for” or “against” the proposal) by shareholders on their

proxy cards. Alternatively, the company may seek discretionary voting authority (as further

explained below) with respect to a proposal omitted from the company’s proxy statement and

proxy card in the limited circumstances where a company is allowed to do so under the current

proxy rules, in which case the company would be authorized to exercise its discretion to

determine how to vote on the proposal.

Current Rule 14a-4 addresses when a proxy card submitted by a shareholder may confer

discretionary voting authority on the proxy holder. 192 Discretionary voting authority under Rule

14a-4(c) is the proxy holder’s power to vote on behalf of a shareholder with respect to a matter

that is not included on the proxy card. 193 A company may omit from its proxy card a

outside of the processes associated with Rule 14a-8 and proxy access bylaws. Advance notice bylaws generally

require a shareholder who intends to nominate a director or make a proposal at a shareholder meeting to

provide certain information to the company about itself, its director nominees, and its proposals within a

specified period of time in advance of the meeting.

192

See 17 CFR 240.14a-4.

193

See 17 CFR 240.14a-4(c). This authority differs from broker discretionary authority, which relates to the

ability of brokers to vote uninstructed shares held in “street name” (i.e., held in the name of the bank, broker,

or other intermediary on behalf of the shareholder), generally regarding routine matters on the proxy card. See

New York Stock Exchange Rule 452. Discretionary voting authority under Rule 14a-4(c) also differs from

discretionary authority under 17 CFR 240.14a-4(b)(1) (“Rule 14a-4(b)(1)”), pursuant to which a company (or

soliciting shareholder, as the case may be) receives the power to vote on behalf of a shareholder because the

shareholder has submitted a signed proxy card without specifying a choice regarding one or more proposals

listed on the card.

shareholder proposal presented by means other than Rule 14a-8 194 and may vote the shares

represented by proxies the company receives against the proposal if, under Rule 14a-4(c), the

proposal is a matter on which a proxy may confer discretionary voting authority. Current 17

CFR 240.14a-4(c)(1) (“Rule 14a-4(c)(1)”) permits a company to exercise discretionary voting

authority at an annual meeting to vote the shares represented by proxies with respect to matters

for which the company did not receive timely notice, provided a specific statement to that effect

is made in the company’s proxy statement or form of proxy. 195 Current 17 CFR 240.14a-4(c)(2)

(“Rule 14a-4(c)(2)”) permits a company to exercise discretionary voting authority at an annual

meeting with respect to matters for which the company has received timely notice, provided the

company includes, in its proxy statement, “advice” 196 on the nature of the matter and how the

company intends to exercise its discretion to vote on each matter. Currently, however, a

company may not exercise discretionary voting authority under Rule 14a-4(c)(2) if the

shareholder proponent does the following: (i) notifies the company on a timely basis in

accordance with the rule that it intends to send its own proxy materials to holders of at least the

percentage of the company’s voting shares required under applicable law to carry the

194

By “means other than Rule 14a-8,” “other than through Rule 14a-8,” or “outside of the Rule 14a-8 process,”

we mean, generally, proposals that are submitted pursuant to the advance notice provisions of a company’s

governing documents and are a proper subject for shareholder action under applicable State law, and that a

shareholder intends to present for a vote at the shareholder meeting but does not expressly request that the

company include in the company’s proxy materials.

195

Rule 14a-4(c)(1) provides that a company has not received timely notice if the company did not have notice of

the matter at least 45 days before the date on which the company first sent its proxy materials for the prior

year’s annual meeting of shareholders (or the date specified by an applicable advance notice provision in the

company’s bylaws). In addition, if during the prior year the company did not hold an annual meeting, or if the

date of the meeting has changed more than 30 days from the prior year, then notice is not sufficient if the

company has not received it a “reasonable time” before the company sends its proxy materials for the current

year. See 17 CFR 240.14a-4(c)(1).

196

“Advice” as currently used in the rule means that a company must provide brief disclosure regarding the nature

of the proposal.

proposal; 197 (ii) includes the same statement in its own proxy materials; 198 and (iii) provides

evidence to the company that it has in fact solicited the holders of at least the percentage of

voting shares required to carry the proposal. 199

17 CFR 240.14a-4(c)(3) (“Rule 14a-4(c)(3)”) through 17 CFR 240.14a-4(c)(7) (“Rule

14a-4(c)(7)”) set forth additional matters on which a proxy may confer discretionary voting

authority. These consist of:

•

for solicitations by the company related to special meetings, or for solicitations by

persons other than the company related to annual or special meetings, matters which the

persons making the solicitation do not know, a “reasonable time” before the solicitation,

are to be presented at the meeting, if a specific statement to that effect is made in the

proxy statement or form of proxy; 200

•

approval of the minutes of the prior meeting if such approval does not amount to

ratification of the action taken at that meeting; 201

•

the election of any person to any office for which a bona fide nominee is named in a

proxy statement and such nominee is unable to serve or for good cause will not serve; 202

197

See 17 CFR 240.14a-4(c)(2)(i).

198

See 17 CFR 240.14a-4(c)(2)(ii).

199

See 17 CFR 240.14a-4(c)(2)(iii).

200

See 17 CFR 240.14a-4(c)(3).

201

See 17 CFR 240.14a-4(c)(4).

202

See 17 CFR 240.14a-4(c)(5).

•

any proposal omitted from the proxy statement and form of proxy pursuant to Rule 14a8 or 17 CFR 240.14a-9 (“Rule 14a-9”); 203 and

•

matters incident to the conduct of the meeting. 204

2. Historical Background

Beginning in 1948, the Commission has sought to balance flexibility for companies with

shareholder protection by adopting amendments to the rules governing discretionary voting

authority, with amendments often related to the determination of when a company has received

sufficient notice of a shareholder’s proposal. 205 Nonetheless, there have been numerous disputes

between companies and shareholder proponents, often involving Commission staff as well,

regarding the timeliness of proposals, particularly in the period leading up to, and into, the

1990s. 206 Under Rule 14a-4 as it existed at that time, a company could not exercise

discretionary voting authority on matters known to the company a “reasonable time” before its

203

See 17 CFR 240.14a-4(c)(6). Rule 14a-9 prohibits the solicitation of proxies by means of materially false or

misleading statements or omissions.

204

See 17 CFR 240.14a-4(c)(7).

205

See Solicitation of Proxies, Release No. 4185 (Nov. 5, 1948) [13 FR 6678 (Nov. 13, 1948)]; see also, e.g.,

Amendments to Rules on Shareholder Proposals, Release No. 34-39093 (Sept. 18, 1997) [62 FR 50682,

50692-50693 (Sept. 26, 1997)] (“1997 Proposing Release”) (highlighting (i) companies’ interest in avoiding

potential delay and expense when they are notified of proposals after they have begun to print or even mail

proxy materials to shareholders; (ii) shareholders’ interest in having some control over companies’

discretionary voting authority on matters for which the company received adequate notice, meaningful

opportunity to review disclosures in the proxy statement, and sufficient information to make informed voting

decisions; and (iii) companies’ and shareholders’ interest in clearer and more predictable ground rules).

206

See, e.g., United Mine Workers of Am., et al. v. Pittston Co., No. 89-0962, 1989 WL 201060 (D.D.C. Nov. 24,

1989) (finding that the company did not have discretionary voting authority because it had received sufficient

notice, under Rule 14a-4(c)(1), of a shareholder’s proposals, where the shareholder provided the company the

text of the proposals approximately one month before the company’s annual meeting); see also Larkin v.

Baltimore Bancorp, 769 F. Supp. 919, 925 (D.Md. 1991) (noting that Commission staff had notified a

company that the company could not exercise discretionary voting authority where the company received

notice of the dissident’s proposals 12 days before the annual meeting); Union of Needletrades, Industrial and

Textile Employees et al. v. May Department Stores Company, 26 F. Supp. 2d 577 (S.D.N.Y. 1997).

solicitation. 207

With the aim of striking an appropriate balance between the competing interests

involved, the Commission staff, in 1996, expressed its view in a no-action letter to the Idaho

Power Company (the “Idaho Power letter”) that it would not object to the exercise of

discretionary voting authority to vote against a timely received shareholder proposal not subject

to Rule 14a-8, so long as the company advised shareholders about the matter and specified how

the shares would be voted. 208 The Idaho Power letter also indicated, however, that in the staff’s

view a company could not exercise discretionary voting authority if the proponent delivered a

proxy statement and form of proxy to holders of a majority of the shares entitled to vote on the

matter or, if a greater percentage were required under applicable law to carry the proposal,

holders of the minimum required.

In 1997, the Commission proposed amendments to Rule 14a-4 to establish that a

proposal would be considered timely if it were received 45 days before the date on which the

company first mailed its proxy materials for the prior year’s annual meeting (or otherwise, in

207

At the time, Rule 14a-4(c)(1) provided that “[a] proxy may confer discretionary authority to vote with respect

to . . . [m]atters which the persons making the solicitation do not know, a reasonable time before the

solicitation, are to be presented at the meeting, if a specific statement to that effect is made in the proxy

statement or form of proxy.” See Proxy and Stockholder Information Rules, Release No. 34-8206 (Dec. 14,

1967) [32 FR 20960, 20963 (Dec. 29, 1967)].

208

See Idaho Power Co., SEC No-Action Letter, 1996 WL 114545 (Mar. 13, 1996); see also Borg-Warner

Security Corp., SEC No-Action Letter, 1996 WL 119943 (Mar. 14, 1996). The statements in staff no-action

letters and any other staff statements or guidance referenced in this release represent the views of Commission

staff. See 17 CFR 202.1(d). Any such staff statements are not a rule, regulation, or statement of the

Commission. Further, the Commission has neither approved nor disapproved their content. These statements,

like all staff statements, have no legal force or effect; they do not alter or amend applicable law, and they

create no new or additional obligations for any person. See generally Statement of Informal Procedures for the

Rendering of Staff Advice with Respect to Shareholder Proposals, Release No. 34-12599 (July 7, 1976) [41 FR

29989 (July 20, 1976)].

the case of an applicable advance notice bylaw provision). 209 The proposed rules also would

have permitted companies to exercise discretionary voting authority on timely received

proposals, provided companies included in their proxy statements a “discussion of the nature”

of the proposals, as well as, on the proxy card, a cross-reference to this discussion in the proxy

statement and a check box to permit shareholders to prevent the proxy holder from exercising

discretionary voting authority. 210

In 1998, following public comment on the proposed rules, the Commission declined to

adopt the check box concept and instead effectively adopted the approach set out in the Idaho

Power letter, namely that companies could exercise discretionary voting authority with respect

to timely received proposals, unless, among other matters, the proponent solicited a sufficient

number of shareholders. 211 The final rule did, however, retain the proposed 45-day period, or

alternative advance notice deadline, to determine whether a proposal is timely received. 212 The

Rule 14a-4 framework adopted in 1998 continues to apply today, although, as discussed further

below, the likelihood of companies including shareholder proposals in their proxy materials

even when not required appears to have increased following the Commission’s adoption of the

universal proxy rules in 2021. 213

209

See 1997 Proposing Release at 50692. The Commission noted that the availability of discretionary voting

authority on proposals had “been the subject of litigation and attendant uncertainty.”

210

See id. at 50693.

211

See 1998 Adopting Release at 29110. This provision was codified—and remains to this day—as Rule 14a4(c)(2). See section II.B.3 below for a discussion of why the Commission in 1998 abandoned the check box

approach in favor of the Idaho Power approach, and why we are now once again proposing to adopt the check

box approach.

212

This provision was codified—and remains to this day—as Rule 14a-4(c)(1). We are now proposing clarifying

changes to that rule. See section II.C. below.

213

See infra notes 221 through 223 and related text.

3. Proposed Rule Amendments

As further described below, under the current proxy rules, companies may feel

compelled to include on their proxy cards certain shareholder proposals received outside of

Rule 14a-8, notwithstanding that the Federal proxy rules (and existing State law) do not require

that they do so. We are proposing amendments to Rule 14a-4(c) that are intended to address this

issue by providing companies with greater flexibility to seek and obtain discretionary voting

authority regarding such proposals. At the same time, the proposed amendments would provide

shareholders with the means to elect to prevent the company from exercising such authority

with respect to their individual shares.

The proposed amendments to Rule 14a-4(c) are aligned with our proposed rescission of

Rule 14a-8, as companies may rece

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