The Shareholder Proposal Rule
Congressional research reportFeb 11, 2026
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The Shareholder Proposal Rule
February 11, 2026
Congressional Research Service
https://crsreports.congress.gov
R48855
SUMMARY
The Shareholder Proposal Rule
R48855
February 11, 2026
Under Securities and Exchange Commission (SEC) Rule 14a-8, public companies must include
shareholder proposals in their proxy materials, provided proposal sponsors comply with the rule’s
Jay B. Sykes
eligibility and procedural requirements and the proposals do not fall within certain substantive
Legislative Attorney
grounds for exclusion. Shareholder proposals generally involve shareholder recommendations
regarding corporate governance or environmental and social (E&S) issues raised by a company’s
operations. Rule 14a-8, often called the “shareholder proposal rule,” has long been a source of
debate. The rule’s supporters tout it as a key tool in the shareholder rights movement and credit
shareholder proposals with spurring valuable corporate governance reforms. Rule 14a-8’s critics argue that many proposals
seek to advance social and political agendas unrelated to shareholder value, creating costly distractions for corporate
management.
The shareholder proposal rule is a component of the federal proxy rules, which require public companies to disclose various
information to shareholders when soliciting proxies for shareholder meetings. The SEC has traditionally taken the view that
state law allows shareholders to present certain types of proposals for a vote at annual meetings. Shareholder Proposals, 72
Fed. Reg. 43466, 43467 (Aug. 3, 2007). The SEC adopted the shareholder proposal rule in 1942 based on its conclusion that
company proxy materials would be materially misleading if they omitted shareholder proposals of which management had
notice. Jill E. Fisch, From Legitimacy to Logic: Reconstructing Proxy Regulation, 46 VAND. L. REV. 1129, 1143–44 (1993).
Companies that intend to exclude proposals for non-compliance with Rule 14a-8’s eligibility, procedural, or substantive
requirements must notify the SEC and explain the basis for the omission. 17 C.F.R. § 240.14a-8(j)(1) (2025). As a matter of
practice, companies file these notifications along with requests for “no-action” letters from SEC staff—i.e., letters stating that
SEC staff will not recommend an enforcement action if a company omits a proposal from its proxy materials. While
no-action letters are not legally binding on any party, they play a key practical role in determining which proposals proceed
to a shareholder vote.
As of this writing, the shareholder proposal rule may be approaching an inflection point. In an October 2025 speech, SEC
Chairman Paul Atkins signaled a potential departure from the SEC’s longstanding approach to precatory proposals—i.e.,
proposals that recommend or request that companies take certain actions, as distinct from proposed bylaw amendments. Paul
S. Atkins, Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25 th Anniversary Gala (Oct. 9,
2025), https://www.sec.gov/newsroom/speeches-statements/atkins-10092025-keynote-address-john-l-weinberg-centercorporate-governances-25th-anniversary-gala. In his speech, Chairman Atkins expressed “high confidence” that SEC staff
would grant no-action requests seeking to exclude precatory proposals as improper under Delaware law if such requests are
supported by an opinion of counsel. Id. Chairman Atkins went on to announce his support for a “fundamental reassessment”
of Rule 14a-8, including the rule’s “fundamental premise that shareholders should be able to force companies to solicit for
their proposals” at little or no personal expense. Id.
Congress is also considering legislation that would reform various aspects of the shareholder proposal regime, including Rule
14a-8 itself, institutional proxy voting, and the proxy advisor industry.
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Contents
History of the Shareholder Proposal Rule ....................................................................................... 2
Shareholder Voting and Proxy Regulation ................................................................................ 2
The Early History of the Shareholder Proposal Rule ................................................................ 5
Social Policy Proposals in the 1960s and 1970s ....................................................................... 7
The 1980s and 1990s: Modest Legal Evolution, Transformative Market Changes ................ 10
1982 Proposed Amendments and 1983 Final Amendments............................................... 11
From Cracker Barrel to the 1998 Amendments ............................................................... 12
Institutional Investor Activism in the 1980s and 1990s .................................................... 13
Shareholder Proposals in the 21st Century .............................................................................. 16
Governance Proposals ....................................................................................................... 16
Environmental and Social Proposals ................................................................................ 21
The Future of Shareholder Proposals ...................................................................................... 23
The SEC No-Action Process ......................................................................................................... 24
Eligibility and Procedural Requirements....................................................................................... 27
Substantive Exclusions .................................................................................................................. 28
Improper Subject for Shareholder Action ............................................................................... 28
Precatory Proposals........................................................................................................... 28
Bylaw Amendments .......................................................................................................... 30
Violations of Law .................................................................................................................... 34
Violations of the Proxy Rules.................................................................................................. 35
Personal Grievances and Special Interests .............................................................................. 35
Relevance ................................................................................................................................ 36
Absence of Power/Authority ................................................................................................... 38
Ordinary Business ................................................................................................................... 39
Director Elections.................................................................................................................... 44
Conflicts with Company Proposal........................................................................................... 45
Substantially Implemented ...................................................................................................... 46
Duplication .............................................................................................................................. 47
Resubmissions ......................................................................................................................... 48
Specific Amount of Dividends ................................................................................................ 48
Issues for Congress ........................................................................................................................ 48
Justifications for and Criticisms of the Shareholder Proposal Rule ........................................ 49
Corporate Social Responsibility ....................................................................................... 49
Governance Reforms ........................................................................................................ 54
Information Production and Disclosure ............................................................................ 54
Corporate Democracy ....................................................................................................... 55
Proposals to Reform the Shareholder Proposal Regime ......................................................... 56
The Shareholder Proposal Rule ........................................................................................ 56
Institutional Voting............................................................................................................ 60
Proxy Advisors .................................................................................................................. 63
Concluding Thoughts .............................................................................................................. 70
Contacts
Author Information........................................................................................................................ 71
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The Shareholder Proposal Rule
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U
nder Securities and Exchange Commission (SEC) Rule 14a-8, public companies must
include shareholder proposals in their proxy materials, provided proposal sponsors
comply with the rule’s eligibility and procedural requirements and the proposals do not
fall within certain substantive grounds for exclusion.1 Shareholder proposals generally involve
shareholder recommendations regarding corporate governance or environmental and social issues
raised by a company’s operations.2 Rule 14a-8, often called the shareholder proposal rule, has
long been a source of debate. The rule’s supporters tout it as “the epicenter of the shareholder
rights movement” and credit shareholder proposals with spurring valuable corporate governance
reforms.3 Rule 14a-8’s critics argue that many proposals seek to advance social and political
agendas unrelated to shareholder value, creating costly distractions for corporate management.4
In 2025, shareholder proposals attracted significant attention from policymakers. Aspects of the
proposal ecosystem were the subject of three congressional hearings,5 an executive order,6 and
state legislation.7 In October 2025, SEC Chairman Paul Atkins announced changes in SEC staff’s
understanding of Rule 14a-8 that could lay the groundwork for substantial narrowing of the rule.8
The SEC’s regulatory flexibility agenda indicates that amendments to the rule may be
forthcoming in the spring of 2026.9
This report is a primer on the shareholder proposal rule. It is divided into five parts. First, the
report outlines the history of the rule. Second, the report discusses the SEC’s no-action process,
whereby SEC staff provides its views as to whether companies may exclude specific shareholder
proposals from their proxy materials because of a sponsor’s non-compliance with Rule 14a-8’s
eligibility, procedural, or substantive requirements. The third section of the report reviews the
rule’s eligibility and procedural requirements, while the fourth section examines its 13 substantive
exclusions. The final section of the report discusses issues for Congress, including the primary
justifications for and criticisms of Rule 14a-8 and proposals to reform the shareholder proposal
regime.
1 17 C.F.R. § 240.14a-8 (2025).
2 See infra “Governance Proposals” and “Environmental and Social Proposals.”
3 J. Robert Brown, Jr., The Evolving Role of Rule 14a-8 in the Corporate Governance Process, 93 DENVER L. REV.
ONLINE 151, 151 (2016).
4 Lawrence Cunningham, Restore Corporate Discipline by Reining in Shareholder Proposals, BLOOMBERG LAW
(Oct. 27, 2025), https://news.bloomberglaw.com/legal-exchange-insights-and-commentary/restore-corporate-disciplineby-reining-in-shareholder-proposals.
5 Proxy Power and Proposal Abuse: Reforming Rule 14a-8 to Protect Shareholder Value, Hearing Before the H.
Comm. on Fin. Servs., 119th Cong. (2025); The Proxy Advisor Duopoly’s Anticompetitive Conduct, Hearing Before the
H. Comm. on the Judiciary, Subcomm. on the Admin. State, Regul. Reform & Antitrust, 119th Cong. (2025); Exposing
the Proxy Advisory Cartel: How ISS and Glass Lewis Influence Markets, Hearing Before the H. Comm. on Fin. Servs.,
Subcomm. on Cap. Mkts., 119th Cong. (2025).
6 Exec. Order 14,366, 90 Fed. Reg. 58503 (Dec. 11, 2025) [hereinafter E.O. 14366].
7 S.B. 2337, 89th Leg., Reg. Sess. (Tex. 2025).
8 Paul S. Atkins, Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25 th Anniversary Gala
(Oct. 9, 2025) [hereinafter Atkins Speech], https://www.sec.gov/newsroom/speeches-statements/atkins-10092025keynote-address-john-l-weinberg-center-corporate-governances-25th-anniversary-gala https://perma.cc/X6LX-Y9BL.
9 Shareholder Proposal Modernization, OFF. OF INFO. & REGUL. AFFS., OFF. OF MGMT. & BUDGET (2025) [hereinafter
SEC Regulatory Flexibility Agenda], https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202504&RIN=
3235-AN47 https://perma.cc/78DE-NMY6.
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History of the Shareholder Proposal Rule
Shareholder Voting and Proxy Regulation
The history of the shareholder proposal rule begins with the advent of federal proxy regulation in
the 1930s. Proxy regulation, like many other aspects of securities law, was a response to the
separation of ownership and control of large public corporations.10 While shareholders are often
described as “owning” corporations,11 they do not manage them.12 Rather, state corporate law
vests managerial authority in boards of directors,13 which delegate day-to-day decision-making
responsibilities to corporate officers.14 The resulting centralization of managerial authority
generates well-recognized benefits.15 However, the separation of corporate ownership and control
also produces agency costs—losses that result from divergences between the interests of
shareholders and those of directors and officers.16 Because of such divergences, corporate leaders
may self-deal,17 engage in inefficient “empire building,”18 retain unnecessary levels of cash,19
seek high levels of performance-insensitive compensation,20 resist takeover offers that would
benefit shareholders,21 exhibit greater risk aversion than diversified shareholders would prefer,22
and expend less effort than a sole owner.23
Much of corporate and securities law can be understood as an attempt to balance the benefits of
centralized managerial authority against the costs that result from delegating corporate control to
agents.24 Shareholder voting rights represent one governance mechanism designed to mitigate
agency costs.25 A combination of state law, federal law, and stock exchange rules allow
10 See generally ADOLF BERLE & GARDINER MEANS, THE MODERN CORPORATION AND PRIVATE PROPERTY (1932) (the
seminal work on the separation of ownership and control of large public companies).
11 E.g., Malone v. Brincat, 722 A.2d 5, 9 (Del. 1998). As a matter of corporate law theory, the proposition that
shareholders “own” corporations is controversial. Julian Velasco, Shareholder Ownership and Primacy, 2010 U. ILL. L.
REV. 897, 899 (2010).
12 Orman v. Cullman, 794 A.2d 5, 19 (Del. Ch. 2002) (“A cardinal precept of the General Corporation Law of the State
of Delaware is that directors, rather than shareholders, manage the business and affairs of the corporation.”) (quotation
marks and citation omitted).
13 DEL. CODE ANN. tit. 8, § 141(a) (2025); MODEL BUS. CORP. ACT § 8.01(b) (2025).
14 See Grimes v. Donald, No. CIV. A. 13358, 1995 WL 54441, at *8 (Del. Ch. Jan. 11, 1995), aff'd, 673 A.2d 1207
(Del. 1996).
15 Stephen M. Bainbridge, Director Primacy: The Means and Ends of Corporate Governance, 97 NW. U. L. REV. 547
(2003).
16 Michael C. Jensen & William H. Meckling, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership
Structure, 3 J. FIN. ECON. 305 (1976).
17 Claire Hill & Brett McDonnell, Sanitizing Interested Transactions, 36 DEL. J. CORP. L. 903 (2011).
18 Edward B. Rock, Adapting to the New Shareholder-Centric Reality, 161 U. PA. L. REV. 1907, 1915 (2013).
19 Id. at 1914.
20 LUCIAN BEBCHUK & JESSE FRIED, PAY WITHOUT PERFORMANCE: THE UNFULFILLED PROMISE OF EXECUTIVE
COMPENSATION (2006).
21 Frank H. Easterbrook & Daniel R. Fischel, The Proper Role of a Target’s Management in Responding to a Tender
Offer, 94 HARV. L. REV. 1161 (1981).
22 John C. Coffee, Jr., Shareholders versus Managers: The Strain in the Corporate Web, 85 MICH. L. REV. 1, 19 (1986).
23 Jensen & Meckling, supra note 16, at 312–13.
24 Rock, supra note 18, at 1911 (describing the separation of ownership and control as the “master problem” of
U.S. corporate law).
25 Frank H. Easterbrook & Daniel R. Fischel, Voting in Corporate Law, 26 J. L. & ECON. 395 (1983). As discussed
(continued...)
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shareholders of public companies to vote on certain matters, such as director elections,26 charter
amendments,27 mergers,28 and executive compensation plans.29 As relevant here, the SEC has also
traditionally interpreted state law as granting shareholders the right to present certain types of
proposals for a vote at annual shareholder meetings.30
The mechanics of shareholder voting have evolved over the history of corporate law. At common
law, shareholders could vote only by attending an annual meeting in person, unless a
corporation’s organizing documents provided otherwise.31 While some corporate charters allowed
shareholders to delegate voting authority to a proxy who attended an annual meeting, 18th and
19th-century courts were close to unanimous in rejecting the argument that shareholders could
vote by proxy in the absence of such a provision or statutory authorization.32
In the late 19th century, the emergence of large corporations with many geographically dispersed
shareholders rendered in-person voting problematic, as few shareholders had the incentive and
ability to travel to annual meetings.33 State legislatures responded by enshrining a right to proxy
voting in statute. Between 1870 and 1900, nearly all states amended their corporate laws to give
shareholders the right to vote by proxy.34
Proxy voting has also proved useful to corporations, which solicit proxies to meet state law
quorum requirements for annual and special meetings.35 To ensure those requirements are met,
public companies ordinarily distribute to shareholders a form of proxy (often called a proxy card
or simply a proxy) by which shareholders can authorize a corporate official to vote their shares as
instructed.36 In contested votes, shareholders may receive proxies from both incumbent
management and a dissident shareholder running an alternative slate of director candidates or
opposing a management proposal.37
below, shareholder voting—particularly in the context of shareholder proposals—may also serve other functions. See
infra “Justifications for and Criticisms of the Shareholder Proposal Rule.”
26 DEL. CODE ANN. tit. 8, § 211(b); MODEL BUS. CORP. ACT § 8.03(c).
27 DEL. CODE ANN. tit. 8, § 242(b); MODEL BUS. CORP. ACT § 10.03(b).
28 DEL. CODE ANN. tit. 8, § 251(c); MODEL BUS. CORP. ACT § 11.04(b).
29 15 U.S.C. § 78n-1; NYSE LISTED COMPANY MANUAL § 303A.08 (2025); NASDAQ STOCK MKT. LLC RULES § 5635(c)
(2025).
30 See Shareholder Proposals, 72 Fed. Reg. 43466, 43467 (Aug. 3, 2007) (codified at 17 C.F.R. pt. 240).
31 Leonard H. Axe, Corporate Proxies, 41 MICH. L. REV. 38, 38–40 (1942).
32 Sarah C. Haan, Voting Rights in Corporate Governance: History and Political Economy, 96 S. CAL. L. REV. 881,
887–89 (2023).
33 Jill E. Fisch, From Legitimacy to Logic: Reconstructing Proxy Regulation, 46 VAND. L. REV. 1129, 1134 (1993).
34 Haan, supra note 32, at 902–04.
35 Fisch, supra note 33, at 1135. The New York Stock Exchange and Nasdaq also require listed companies to solicit
proxies for all shareholder meetings. NYSE LISTED COMPANY MANUAL § 402.04(A); NASDAQ STOCK MKT. LLC RULES
§ 5620(b).
36 Fisch, supra note 33, at 1135.
37 Id. at 1135 n.25.
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By the early 20th century, the proxy solicitation process had supplanted the shareholder meeting
as the key forum for shareholder voting.38 The proxy system has thus been described as the “main
instrument—the beating heart—of corporate power.”39
In the wake of the 1929 stock market crash, New Deal reformers sought to regulate a range of
practices in securities markets, including the proxy solicitation process.40 Before the adoption of
the federal proxy rules, corporations frequently sent shareholders a proxy card giving
management sweeping discretionary authorities, sometimes extending for several years.41 Often,
proxies authorized a corporate official to vote shares in director elections (which were usually
uncontested) and take other actions considered “desirable.”42 Shareholders were invited to sign
and return proxies, but sometimes were not informed of all the items that would be presented for
voting at a shareholder meeting.43 These practices led to concerns that the proxy system had
become “a self-perpetuation and ... self-approval device” for incumbent managers.44
Congress responded to these concerns by enacting Section 14(a) of the Securities Exchange Act
of 1934 (the Exchange Act), which made it unlawful to “solicit” proxies in contravention of rules
that the SEC may prescribe “as necessary or appropriate in the public interest or for the protection
of investors.”45 Using this authority, the SEC adopted the first proxy rules in 1935 and has revised
them extensively over time.46 Today, the proxy rules apply to companies with securities registered
under Section 12 of the Exchange Act—i.e., companies that are listed on a national securities
exchange or that exceed certain asset and shareholder thresholds.47
The proxy rules are principally focused on ensuring that solicited shareholders receive adequate
disclosures.48 To that end, the rules prohibit soliciting parties from transmitting a proxy card to
shareholders unless the card is accompanied or preceded by a proxy statement containing
specified information.49 In addition to this core disclosure mandate, the proxy rules include
38 Sheldon E. Bernstein & Henry G. Fischer, The Regulation of the Solicitation of Proxies: Some Reflections on
Corporate Democracy, 7 U. CHI. L. REV. 226, 227 (1940) (“It is generally recognized that in the larger corporations the
stockholders’ meeting is now only a necessary formality; that stockholder expression can only be had by the statutory
device of proxy. As a result, within limitations, realistically the solicitation of proxies is today the stockholders’
meeting.”).
39 Haan, supra note 32, at 888.
40 JOEL SELIGMAN, THE TRANSFORMATION OF WALL STREET: A HISTORY OF THE SECURITIES AND EXCHANGE
COMMISSION AND MODERN CORPORATE FINANCE 1–240 (3d ed. 2003).
41 Frank D. Emerson & Franklin C. Latcham, SEC Proxy Regulation: Steps Toward More Effective Stockholder
Participation, 59 YALE L.J. 635, 635 (1950).
42 Id.
43 Id. at 635–36.
44 Bernstein & Fischer, supra note 38, at 227.
45 15 U.S.C. § 78n(a)(1). A Senate committee report on the Exchange Act stated: “Too often proxies are solicited
without explanation to the stockholder of the real nature of the question for which authority to cast his vote is sought. It
is contemplated that the rules and regulations promulgated by the Commission [under Section 14] will protect investors
from promiscuous solicitation of their proxies, on the one hand, by irresponsible outsiders seeking to wrest control of a
corporation away from honest and conscientious corporate officers; and, on the other hand, by unscrupulous corporate
officers seeking to retain control of the management by concealing and distorting facts.” S. Rep. No. 1455, 73d Cong.
2d Sess. 77 (1934).
46 4 LOUIS LOSS ET AL., SECURITIES REGULATION 425–34 (4th ed. 2009) (cataloguing the evolution of the proxy rules).
47 15 U.S.C. §§ 78l(b), 78l(g), 78n(a)(1).
48 Bus. Roundtable v. SEC, 905 F.2d 406, 410–12 (D.C. Cir. 1990) (explaining that proxy regulation “bears almost
exclusively on disclosure” while declining to say that disclosure is “necessarily the sole subject” of Section 14 of the
Exchange Act).
49 17 C.F.R. § 240.14a-4(f).
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requirements concerning the content of proxy cards (Rule 14a-4),50 an anti-fraud provision
prohibiting false or misleading statements and omissions in proxy solicitation materials
(Rule 14a-9),51 and a provision governing the circumstances in which companies must include
shareholder proposals in their proxy materials, which is often called the shareholder proposal rule
(Rule 14a-8).52
State and Federal Regulation of Corporate Governance
Corporate governance is shaped by both state and federal law. With limited exceptions, corporations are
chartered at the state level. Under a choice-of-law rule known as the “internal affairs doctrine,” matters that are
“peculiar to the relationships among or between the corporation and its current officers, directors, and
shareholders” are resolved based on the law of the state in which the corporation is organized. Edgar v. Mite
Corp., 457 U.S. 624, 645 (1982). Thus, issues such as the fiduciary duties of directors and the basic allocation of
powers between boards and shareholders are governed by state law. GEVURTZ, infra note 354, at 181–248,
279–409. Delaware has long been the most popular chartering state for large public companies. As of 2024,
roughly 65% of the S&P 500 had Delaware charters. Amy Simmerman et al., Delaware’s Status as the Favored
Corporate Home: Reflections and Considerations, HARV. L. SCH. F. ON CORP. GOV. (May 8, 2024),
https://corpgov.law.harvard.edu/2024/05/08/delawares-status-as-the-favored-corporate-home-reflections-andconsiderations https://perma.cc/324C-YFKH. Accordingly, in discussing state corporate law, this report focuses
primarily on Delaware law.
Federal securities law also exerts a significant influence on the governance of publicly traded companies. It is often
said that, while state corporate law governs substantive issues of corporate governance, federal securities law is
primarily concerned with ensuring that public companies make adequate disclosures to investors. James J. Park,
Reassessing the Distinction Between Corporate and Securities Law, 64 UCLA L. REV. 116, 134–35 (2017). Judicial
decisions interpreting the reach of the federal securities laws reflect this distinction. E.g., Santa Fe Indus. v. Green,
430 U.S. 462 (1977); Bus. Roundtable v. SEC, 905 F.2d 406 (D.C. Cir. 1990). Disclosure, however, can shape
corporate governance. A requirement to disclose related-party transactions, for example, may discourage
problematic self-dealing. 17 C.F.R. § 229.404 (2025). The substance/disclosure distinction between corporate law
and securities law is also not entirely accurate, as the governance of exchange-listed companies has become
increasingly federalized over the course of the 21st century. MARC I. STEINBERG, THE FEDERALIZATION OF CORPORATE
GOVERNANCE 191–224 (2018). For example, federal law now mandates that certain board committees of listed
companies consist entirely of directors who are independent from management. 15 U.S.C. §§ 78j-1(m), 78j-3(a).
The federal proxy rules blend substantive and disclosure-based regulation. While the proxy rules are primarily
focused on disclosure, Bus. Roundtable, 905 F.2d at 410–12, they include some substantive rules—for example, a
rule against “bundling” separate proposals and a requirement that companies use universal proxy cards in
contested director elections. 17 C.F.R. §§ 240.14a-4(a)(3), 240.14a-19(e). The shareholder proposal rule (a
component of the proxy rules) defies easy categorization under the substance/disclosure dichotomy. As discussed
below, the shareholder proposal rule can be characterized as a disclosure-based requirement that facilitates
shareholders’ ability to exercise their substantive state law rights. At the same time, the rule includes eligibility
requirements that are not rooted in state law, along with a set of substantive exclusions that has come to
resemble a type of federal common law. Med. Comm. for Human Rts. v. SEC, 432 F.2d 659, 677 (D.C. Cir. 1970),
vacated as moot by 404 U.S. 403 (1972). Irrespective of whether the shareholder proposal rule is best categorized
as substantive or disclosure-based, the rule now plays a central role in U.S. corporate governance.
The Early History of the Shareholder Proposal Rule
Like other elements of the federal proxy rules, the shareholder proposal rule represents an attempt
to “replicate the old-style annual meeting that was personally attended by shareholders.”53 The
SEC adopted the predecessor to Rule 14a-8 based on its view that state law afforded shareholders
50 Id. § 240.14a-4.
51 Id. § 240.14a-9.
52 Id. § 240.14a-8.
53 Fisch, supra note 33, at 1142.
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the right to present certain types of proposals for a vote at annual meetings.54 With widespread
proxy voting, however, such proposals had little chance of passing unless corporations included
the proposals in their proxy materials. Proposal sponsors thus asked corporations to do so.55
Before the SEC enacted the shareholder proposal rule, management’s legal responsibilities in
these circumstances were unclear. While the proxy regulations prohibited misleading omissions in
proxy materials, they did not explicitly address whether it was misleading for corporations to fail
to disclose shareholder proposals that were unrelated to the matters for which management sought
proxy authority.56
In several cases in the late 1930s, the SEC took the position that it was materially misleading for
a company to omit from its proxy materials issues that it knew would be raised at a shareholder
meeting.57 The agency ultimately codified that view in 1940.58 Two years later, the SEC adopted
Rule X-14-7, Rule 14a-8’s predecessor, which required corporations to include in their proxy
materials any shareholder proposal of which they had reasonable notice as long as the proposal
involved a “proper subject” for shareholder action.59
In 1945, the SEC’s Division of Corporation Finance advised in guidance that whether an issue
was a “proper subject” for shareholder action depended on the law of the state in which a
corporation was organized.60 Ultimately, the SEC would conclude that shareholder proposals
purporting to mandate that companies take certain actions are generally impermissible under state
law.61 As a result, with the exception of proposed bylaw amendments (which are discussed in
greater detail below), proper shareholder proposals typically must consist of nonbinding
recommendations or requests.62 These types of resolutions are called “precatory” proposals and
constitute the overwhelming majority of shareholder proposals submitted in a typical year.63
In 1947, the SEC required companies that intended to exclude a shareholder proposal from their
proxy materials to file the reasons for the exclusion with the SEC.64 Facing this requirement,
companies began to inquire into whether SEC staff would recommend an enforcement action if
the companies omitted certain proposals.65 These “no-action” requests—now a core part of the
shareholder proposal regime—are discussed in greater detail below.66 Although SEC staff’s
responses to no-action requests are not binding on any party, the no-action process has led the
54 See Shareholder Proposals, 72 Fed. Reg. 43466, 43467 (Aug. 3, 2007).
55 Fisch, supra note 33, at 1143.
56 Id. at 1143–44.
57 Bernstein & Fischer, supra note 38, at 233–34.
58 Amendment of Regulation X-14, 5 Fed. Reg. 174, 175 (Jan. 12, 1940) (codified at 17 C.F.R. pt. 240).
59 Solicitation of Proxies Under the Act, 7 Fed. Reg. 10655, 10656 (Dec. 22, 1942) (codified at 17 C.F.R. pt. 240).
60 Proposals as Proper Subject for Action, Exchange Act Release No. 34-3638, 1945 WL 27415 at *2 (Jan. 3, 1945)
[hereinafter 1945 Guidance].
61 Adoption of Amendments Relating to Proposals by Security Holders, Exchange Act Release No. 34-12999, 1976
WL 160347 at *7 (Nov. 22, 1976) [hereinafter 1976 Amendments].
62 17 C.F.R. § 240.14a-8(i)(1) note.
63 SEC Chair Highlights Paths for Companies to Exclude Shareholder Proposals, SULLIVAN & CROMWELL LLP
(Oct. 14, 2025) [hereinafter S&C Memo], https://www.sullcrom.com/insights/memo/2025/October/SEC-ChairHighlights-Paths-Companies-Exclude-Shareholder-Proposals https://perma.cc/7EPR-9JE6.
64 General Rules and Regulations, 12 Fed. Reg. 8768, 8770 (Dec. 24, 1947) (codified at 17 C.F.R. § 240.14a-8). The
1947 amendments to the shareholder proposal rule also clarified that the rule does not apply to director elections. Id.
65 Courtney C. Haseley & Elizabeth A. Ising, The Shareholder Proposal Process, in PRACTICAL GUIDE TO SEC PROXY
AND COMPENSATION RULES § 12.02 (Amy L. Goodman et al. eds., 2022).
66 See infra “The SEC No-Action Process.”
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SEC to assume a key practical role in determining which proposals ultimately proceed to a
shareholder vote.67
Also in 1947, the U.S. Court of Appeals for the Third Circuit (Third Circuit) issued a significant
decision in Rule 14a-8 jurisprudence.68 In SEC v. Transamerica Corp., the Third Circuit affirmed
the SEC’s authority to issue the shareholder proposal rule.69 The court also held that a corporation
was required to include certain proposals in its proxy materials notwithstanding a corporate bylaw
that effectively gave management the authority to decide whether to submit the proposals for a
shareholder vote.70 This aspect of Transamerica may have implications for current debates over
the extent to which corporations can adopt limits on shareholders’ proposal rights beyond the
restrictions in Rule 14a-8—a topic that is discussed later in this report.71
Over the following decades, the SEC added several substantive exclusions to the shareholder
proposal rule. In 1948, the SEC amended the rule to allow companies to exclude from their proxy
materials proposals submitted primarily to redress personal grievances and proposals submitted at
the previous annual meeting that received less than 3% of votes cast.72 In 1952, the agency
adopted an exclusion for proposals submitted “primarily for the purpose of promoting general
economic, political, racial, religious, social or similar causes.”73 1954 amendments included an
exclusion for proposals relating to a company’s “ordinary business operations,” which would later
become one of the rule’s most significant exclusions.74 In 1967, the SEC allowed companies to
omit proposals that conflicted with a management proposal.75
Social Policy Proposals in the 1960s and 1970s
The initial decades of the shareholder proposal rule’s history were dominated by proposals
concerning corporate governance matters—for example, cumulative voting, executive
compensation, and auditor approval.76 In the late 1960s and 1970s, however, shareholders
increasingly utilized the rule to submit proposals that implicated broader social issues,77 such as
environmental pollution, labor relations, and racial and gender equality.78
67 DENNIS R. HONABACH & MARK A. SARGENT, PROXY RULES HANDBOOK § 5:36 (2025).
68 SEC v. Transamerica Corp., 163 F.2d 511 (3d Cir. 1947).
69 Id. at 518.
70 Id.
71 See infra “Private Ordering.”
72 Adoption of Amendments to Proxy Rules, Exchange Act Release No. 34-4185, 1948 WL 28695, at *3 (Nov. 5,
1948).
73 Amendment of Proxy Rules, Exchange Act Release No. 34-4775, Amendment of Proxy Rules, 1952 WL 5254 at *8
(Dec. 11, 1952) [hereinafter 1952 Amendments].
74 Adoption of Amendments to Proxy Rules, Exchange Act Release No. 34-4979, 1954 WL 5772, at *4 (Jan. 6, 1954)
[hereinafter 1954 Amendments]. The 1954 amendments also codified the principle that state law determines whether a
proposal represents a “proper subject” for shareholder action and made the exclusion for resubmitted proposals more
restrictive. Id.
75 Adoption of Amendments to Proxy Rules and Information Rules, Exchange Act Release No. 34-8206, 1967 WL
88215, at *9 (Dec. 14, 1967).
76 Sean J. Griffith, Corporate Speech and Corporate Purpose: A Theory of Corporate First Amendment Rights, 5 J.
FREE SPEECH L. 441, 455 & n.52 (2024).
77 Harwell Wells, A Long View of Shareholder Power: From the Antebellum Corporation to the Twenty-First Century,
67 FLA. L. REV. 1033, 1083–84 (2015).
78 Griffith, supra note 76, at 457.
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During the previous decades, the SEC had attempted to limit such proposals. In 1945 guidance,
the agency’s Division of Corporation Finance took the position that corporations could exclude
“proposals which deal with general political, social or economic matters” because such matters
were not proper subjects for shareholder action.79 SEC staff issued this guidance in response to a
corporation’s inquiry regarding the propriety of certain proposals that the corporation had no
apparent power to implement. The proposals in question requested a federal income tax
exemption for dividends, revisions to the enforcement of the antitrust laws, and the enactment of
federal legislation concerning workers, farmers, and investors.80 The 1945 guidance concluded
that those proposals could be excluded as improper subjects for shareholder action because the
shareholder proposal rule was not intended “to permit stockholders to obtain the consensus of
other stockholders with respect to matters which are of a general political, social or economic
nature,” as “[o]ther forums exist for the presentation of such views.”81
Several years later, a case involving Greyhound Bus Company raised a related but different
question.82 A shareholder had submitted to Greyhound a proposal recommending that the
company consider ending its policy of racially segregated seating in the southern United States.83
Thus, unlike the proposals that prompted the 1945 guidance, the proposal to Greyhound
concerned the company’s conduct. In the words of one commentator, the Greyhound proposal
involved “a mixed question of corporate policy and social policy,” as opposed to a question of
social policy only.84 In the eyes of SEC staff, however, this distinction did not amount to a legal
difference; the Division of Corporation Finance concluded that the proposal was not a proper
subject for shareholder action under the 1945 guidance.85 The following year, the SEC codified an
exclusion for proposals submitted “primarily for the purpose of promoting general economic,
political, racial, religious, social or similar causes.”86
While these measures reflected the SEC’s skeptical view of social policy proposals, the viability
of such proposals was not tested in earnest until a wave of activist campaigns in the late 1960s
and 1970s. In 1970, the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit) was drawn into
this debate in Medical Committee for Human Rights v. SEC.87 The case involved a proposal
requesting that Dow Chemical Company stop manufacturing napalm, which was being used as a
weapon in the Vietnam War.88 The company argued that the proposal fell within Rule 14a-8’s
exclusions for proposals involving “ordinary business operations” (adopted in 1954) and
proposals submitted primarily for the purpose of promoting political or social causes.89 SEC staff
granted the company no-action relief, which the SEC later affirmed.90 Neither SEC staff nor the
SEC, however, identified the basis on which the proposal was excludable or explained the
79 1945 Guidance, supra note 60, at *1.
80 Id.
81 Id. at *2.
82 Peck v. Greyhound Corp., 97 F. Supp. 679 (S.D.N.Y. 1951).
83
Id. at 680.
84 Donald E. Schwartz, The Public-Interest Proxy Contest: Reflections on Campaign GM, 69 MICH. L. REV. 419, 442
(1971).
85 Peck, 97 F. Supp. at 680. A federal district court rejected a lawsuit seeking to enjoin Greyhound from soliciting
proxies without including the proposal in its proxy materials. Id. at 681.
86 1952 Amendments, supra note 73, at *8.
87 432 F.2d 659 (D.C. Cir. 1970), vacated as moot by 404 U.S. 403 (1972).
88 Id. at 663.
89 Id.
90 Id.
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reasoning behind that conclusion.91 Unsatisfied, the D.C. Circuit remanded the case to the SEC
and directed the agency to detail its reasoning.92
While the D.C. Circuit did not decide the merits of the dispute—and the Supreme Court later
vacated its decision on mootness grounds—dicta from the opinion evinced a more favorable view
of social policy proposals than reflected in SEC practice at the time. In particular, the D.C. Circuit
cast doubt on Dow Chemical’s effort to advance broad interpretations of both the ordinary
business and social policy exclusions. That effort, the D.C. Circuit worried, threatened to create a
regime in which “practically any” proposal could be excluded as either too specific (thereby
triggering the ordinary business exclusion) or too general (thereby triggering the social policy
exclusion).93 The court went on to express skepticism that either exclusion applied to the proposal
in question.94 The D.C. Circuit’s discussion of the social policy exclusion was especially pointed,
suggesting that the exclusion may contravene Section 14(a) of the Exchange Act and its
“philosophy of corporate democracy” if read to encompass the proposal.95
The same year that the D.C. Circuit issued the Medical Committee decision, a group of activists
announced a widely publicized effort to promote several proposals submitted to General Motors
(GM).96 That effort—which came to be known as “Campaign GM”—involved nine proposals
raising various environmental and social issues concerning GM’s governance and business
operations.97 The SEC concluded that GM could exclude seven of the proposals, paving the way
for two proposals to proceed to a shareholder vote:
•
a proposed bylaw amendment that would have expanded GM’s board by three directors
(Campaign GM announced that, if this amendment passed, it intended to nominate for the
new seats a former consumer affairs advisor to President Lyndon Johnson, an
African-American civil rights leader, and a professor of environmental biomedicine); and
•
a proposal to create a “Shareholders Committee for Corporate Responsibility” consisting
of representatives of various interests, which would submit a report to shareholders
concerning GM’s past and present efforts regarding air pollution, vehicle safety, and the
social welfare of the nation, among other topics.98
While the proposals received less than 3% support, Campaign GM’s leaders declared the project a
success, contending that it represented “the beginnings of a great national debate on the issues of
corporate responsibility.”99 Within months of the vote, GM also named its first African-American
director and created board committees to supervise the company’s environmental and social
efforts.100
Following these developments, the SEC changed its approach to social policy proposals. In 1972,
the agency amended the social policy exclusion.101 Whereas the previous version of that exclusion
91 Id.
92 Id. at 682.
93 Id. at 679.
94 Id. at 679–81.
95 Id. at 681.
96 Schwartz, supra note 84, at 425.
97 Id. at 534–37.
98 Id. at 424–25.
99 Id. at 430.
100 Wells, supra note 77, at 1084.
101 Solicitations of Proxies, Exchange Act Release No. 34-9784, 1972 WL 125400, at *4 (Sept. 22, 1972) [hereinafter
1972 Amendments].
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was keyed to a proposal’s “purpose” (suggesting a subjective inquiry), the amended exclusion
applied to proposals
that action be taken with respect to any matter, including a general economic, political, racial,
religious, social, or similar cause, that is not significantly related to the business of the issuer
or is not within the control of the issuer.102
The 1972 amendments thus reframed the exclusion around a proposal’s relevance to a company’s
operations. Under the amended exclusion, a company could not omit proposals implicating social
policy issues if the proposals were “significantly related” to its business and involved matters
within the company’s control.103
In 1976, the SEC issued guidance regarding the ordinary business exclusion that likewise
reflected a more favorable stance toward social policy proposals.104 The guidance explained that
proposals with “significant policy, economic or other implications” generally would not fall
within the ordinary business exclusion.105 As a result of this change, by 1976, the SEC’s posture
toward social policy proposals was the “diametric opposite” of its approach at the start of the
decade.106 While the pre-1972 version of Rule 14a-8 permitted companies to exclude proposals
motivated by general social policy concerns, the SEC’s 1976 guidance allowed proposals to avoid
the ordinary business exclusion precisely because they involved such concerns.107 Perhaps
unsurprisingly, the 1970s witnessed a surge in proposals involving environmental and social
issues.108
The 1980s and 1990s: Modest Legal Evolution, Transformative
Market Changes
In the 1980s and 1990s, the shareholder proposal regime experienced incremental legal changes.
While amendments to Rule 14a-8 during that period ultimately proved relatively modest, the SEC
on multiple occasions considered more sweeping revisions, some of which would have
significantly reduced the agency’s participation in the proposal process.109 The most controversial
regulatory development of that era involved a 1992 no-action letter that likewise attempted to
minimize SEC staff’s role as informal arbiter of proposal disputes.110 That effort proved
short-lived, however, as the SEC reversed the policy established by the 1992 letter in 1998.111
102 Id. (emphasis added).
103 Id.
104 1976 Amendments, supra note 61, at *11. In 1976, the SEC also adopted new exclusions for proposals that would, if
implemented, cause a company to violate state, federal, or foreign law; proposals that violate the proxy rules; proposals
that have been rendered moot; and proposals relating to specific amounts of dividends. Id. at *18.
105 Id. at *11. As discussed below, the SEC would later conclude that the ordinary business exclusion allows companies
to exclude proposals that seek to engage in “micromanagement” even if such proposals involve significant policy
issues. See infra “Ordinary Business.”
106 Griffith, supra note 76, at 459.
107 Id.
108 Susan W. Liebeler, A Proposal to Rescind the Shareholder Proposal Rule, 18 GA. L. REV. 425, 431 (1984). Despite
this surge, governance proposals continued to predominate. Stuart L. Gillan & Laura T. Starks, The Evolution of
Shareholder Activism in the United States, in INSTITUTIONAL INVESTOR ACTIVISM: HEDGE FUNDS AND PRIVATE EQUITY,
ECONOMICS AND REGULATION 39, 41 (William W. Bratton & Joseph A. McCahery eds., 2015).
109 See infra “1982 Proposed Amendments and 1983 Final Amendments” & “From Cracker Barrel to the 1998
Amendments.”
110 See infra “From Cracker Barrel to the 1998 Amendments.”
111 Id.
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Alongside these legal changes, the 1980s and 1990s witnessed financial market trends with
profound implications for shareholder proposals and corporate governance more generally: the
growth and increased engagement of institutional investors.112
1982 Proposed Amendments and 1983 Final Amendments
In the early 1980s, the SEC conducted a fundamental reexamination of the shareholder proposal
rule. In 1982, the agency invited public comment on three alternatives to the existing proposal
regime, in addition to the threshold issue of whether shareholders should continue to have access
to company proxy statements for the purpose of disseminating proposals.113
Under the first alternative, the SEC proposed retaining the basic structure of the shareholder
proposal rule with modest additional restrictions, including minimum ownership and
holding-period requirements for proposal proponents.114 The second and third alternatives
involved broader changes. Under the second alternative, companies would have been permitted to
adopt their own proposal procedures, subject to shareholder approval and certain minimum
requirements prescribed by the SEC.115 In this system, SEC staff generally would not have been
involved in determining whether specific proposals were excludable. Rather, disagreements
would have been resolved pursuant to individual company plans and, if necessary, the courts.116
The third alternative would have significantly broadened shareholder access to company proxy
statements by eliminating 11 of Rule 14a-8’s 13 exclusions, retaining only the exclusions for
proposals that are improper under state law and proposals involving director elections.117 Under
this framework, the number of proposals a company would have been required to include in its
proxy materials would have been capped by a numerical formula based on the size of its
shareholder base.118 SEC staff would have no longer adjudicated no-action requests; instead,
courts would have resolved any disputes involving the remaining grounds for exclusion.119
Comments on the proposals reflected “extensive support” for continued shareholder access to
company proxy statements and SEC, as opposed to judicial, administration of the proposal
process.120 A “substantial majority” of commenters favored the first alternative or the retention of
existing rule with no changes.121 There was limited support for the second and third
alternatives.122 Many commenters were concerned that allowing companies to adopt their own
proposal procedures would produce inconsistent and confusing standards.123 Commenters also
112 Stuart L. Gillan & Laura T. Starks, Corporate Governance Proposals and Shareholder Activism: The Role of
Institutional Investors, 57 J. FIN. ECON. 275 (2000).
113 Proposed Amendments to Rule 14a-8, Exchange Act Release No. 34-19135, 1982 WL 600869, at *3 (Oct. 14, 1982)
[hereinafter 1982 Proposed Amendments].
114 Id.
115 Id. at *4–5. Among other things, the second alternative would have prohibited companies from adopting eligibility
criteria that would disqualify shareholders owning at least 1% of voting securities or voting securities with at least
$5,000 in market value. Id. at *25. Companies would have been allowed to adopt “reasonable definitions and criteria”
of their own in administering Rule 14a-8’s exclusions. Id.
116 Id. at *5.
117 Id. at *6.
118 Id.
119 Id.
120 Amendments to Rule 14a-8, Exchange Act Release No. 34-20091, 1983 WL 33272, at *2 (Aug. 16, 1983)
[hereinafter 1983 Amendments].
121 Id.
122 Id.
123 Id.
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criticized the third alternative for suggesting a lottery system to determine which proposals would
proceed to a vote in cases where the number of submitted proposals exceeded the prescribed
maximum.124
The SEC ultimately decided to retain the basic framework of Rule 14a-8 with several of the
changes from the first alternative, including minimum ownership and holding-period
requirements for proposal proponents.125
From Cracker Barrel to the 1998 Amendments
The SEC’s interest in paring back its role in proposal disputes did not end with the 1982 proposed
amendments. In 1992, SEC staff announced a new categorical approach to the ordinary business
exclusion. Under the new approach, companies were permitted to exclude all proposals
concerning their employment policies and practices for the general workforce, even if such
proposals implicated significant social issues.126 Before adopting this position, SEC staff had
applied the agency’s 1976 guidance to conclude that proposals related to affirmative action and
equal employment opportunity involved significant policy issues, meaning they did not fall
within the ordinary business exclusion.127
SEC staff adopted the new categorical approach in granting a no-action request from
Cracker Barrel Old Country Store.128 Cracker Barrel sought to exclude a proposal requesting that
the company implement a non-discrimination policy concerning sexual orientation.129 In granting
the no-action request, SEC staff said that “the line between includable and excludable
employment-related proposals based on social policy considerations” had become “increasingly
difficult to draw.”130 As a result, the no-action letter explained, SEC staff would no longer attempt
to draw such distinctions and companies would be permitted to exclude all employment-related
proposals.131 The SEC later affirmed the no-action letter.132
Litigation followed. In a 1993 lawsuit against Wal-Mart, a federal district court declined to defer
to the SEC’s Cracker Barrel position, reasoning that a categorical rule against
employment-related proposals was inconsistent with the SEC’s 1976 guidance regarding the
ordinary business exclusion, which had been promulgated after notice and comment.133 Applying
the 1976 guidance, the court ordered Wal-Mart to include in its proxy materials a proposal
seeking disclosures regarding the company’s equal opportunity policies and efforts.134 The SEC
was not a party to the Wal-Mart litigation, however, meaning the court’s decision did not require
the agency to abandon its Cracker Barrel position.
124 Id.
125 Id.
126 Cracker Barrel Old Country Store, Inc. SEC No-Action Letter, 1992 WL 289095 (Oct. 13, 1992) [hereinafter 1992
Cracker Barrel No-Action Letter].
127
HONABACH & SARGENT, supra note 67 § 5:12. In contrast, proposals involving employee benefits, hiring and firing,
and compensation for workers other than senior executives were typically deemed excludable as ordinary business
matters. 1992 Cracker Barrel No-Action Letter, supra note 126, at *1.
128 1992 Cracker Barrel No-Action Letter, supra note 126, at *1.
129 Id.
130 Id.
131 Id.
132 Cracker Barrel Old Country Store, Inc., SEC No-Action Letter, 1993 WL 11016 (Jan. 15, 1993).
133 Amalgamated Clothing & Textile Workers Union v. Wal-Mart Stores, Inc., 821 F. Supp. 877, 890 (S.D.N.Y. 1993).
134 Id. at 891–92.
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In a separate lawsuit to which the SEC was a party, a federal district court held that the
Cracker Barrel no-action letter represented an amendment of the ordinary business exclusion that
violated the notice-and-comment requirements of the Administrative Procedure Act (APA).135 The
court thus enjoined the SEC from applying Cracker Barrel absent notice and comment.136 The
U.S. Court of Appeals for the Second Circuit (Second Circuit) ultimately lifted that injunction,
however, concluding that no-action letters are interpretive (as opposed to legislative) rules and
thus not subject to the APA’s notice-and-comment requirements.137
While the Second Circuit’s decision cleared the way for SEC staff to resume application of
Cracker Barrel, controversy persisted. Shareholder activists urged the SEC to rescind the
decision.138 Congress also prodded the agency to consider reversing Cracker Barrel. The
National Securities Markets Improvement Act of 1996 included a provision instructing the SEC
to conduct a study of (1) whether recent statutory, judicial, or regulatory changes had impaired
shareholder access to proxy statements under Section 14 of the Exchange Act, and
(2) shareholders’ ability to have proposals relating to corporate practices and social issues
included in proxy statements.139
The following year, the SEC proposed amendments to Rule 14a-8 that included a reversal of the
Cracker Barrel position.140 The SEC also proposed several other changes—some favoring
proposal proponents, others favoring corporate management—that the agency framed as a
“balanced” approach to the “sometimes conflicting concerns of different participants” in the
proposal process.141 In 1998, the SEC adopted a final rule reversing the Cracker Barrel policy and
returning to a case-by-case approach to employment-related proposals.142 The final amendments
did not, however, include some of the more far-reaching revisions to the shareholder proposal rule
that the agency had contemplated in its 1997 proposed rule.143
Institutional Investor Activism in the 1980s and 1990s
For the first four decades of the shareholder proposal rule, the main proposal sponsors were
individual shareholders.144 Beginning in the mid-1980s, another category of proponent grew in
prominence: institutional investors.145 Initially, the leading institutional sponsors of shareholder
proposals were public pension funds.146 Growth in state and local government employment during
the previous decades, coupled with legal changes allowing increased allocation of pension assets
135 New York City Emps. Ret. Sys. v. SEC, 843 F. Supp. 858, 881 (S.D.N.Y. 1994), reversed by, 45 F.3d 7 (2d Cir.
1995).
136 Id. at 882.
137 New York City Emps. Ret. Sys. v. SEC, 45 F.3d 7, 12–14 (2d Cir. 1995).
138 Phillip R. Stanton, SEC Reverses Cracker Barrel No-Action Letter, 77 WASH. U. L. Q. 979, 989 (1999).
139 P.L. 104-290, § 510(b), 110 Stat. 3416, 3450 (1996).
140 Amendments to Rules on Shareholder Proposals, Exchange Act Release No. 34-39093, 1997 WL 578696, at *13
(Sept. 18, 1997) [hereinafter 1997 Proposed Amendments].
141 Id. at *5.
142 Amendments to Rules on Shareholder Proposals, Exchange Act Release No. 34-40018, 1998 WL 254809, at *3
(May 21, 1998) [hereinafter 1998 Amendments].
143 For example, the SEC declined to adopt a purely economic standard for administering the relevance exclusion, an
“override” mechanism empowering groups of shareholders with at least 3% voting power to overturn certain
exclusions, and stricter requirements for resubmitted proposals. Id. at *12.
144 Liebeler, supra note 108, at 439; Gillan & Starks, supra note 108, at 41.
145 Gillan & Starks, supra note 108, at 43.
146 Id.
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to equities, had laid the groundwork for public pension funds to exert themselves as powerful
players in corporate governance.147 Starting in 1986, a handful of especially engaged public
pension funds began to sponsor large numbers of proposals,148 many of which urged corporations
to dismantle takeover defenses, adopt confidential proxy voting, enhance board independence
from management, or make changes to executive compensation.149
In the 1990s, public pension funds continued to submit proposals, but increasingly pursued
alternative forms of activism, including private outreach to portfolio companies and media
campaigns targeting underperforming firms.150 That shift coincided with the emergence of union
pension funds as shareholder activists. By 1994, union funds had eclipsed public pension funds as
the most frequent institutional sponsors of shareholder proposals.151
Union fund activism generated pushback. Some business groups argued that unions used the
proposal process to gain private benefits for labor at the expense of other shareholders, citing
union proposals targeting firms engaged in collective bargaining negotiations or facing union
organizing campaigns.152 The substance of most union proposals, however, mirrored the types of
proposals offered by public pension funds, focusing on general governance issues such as
takeover defenses and executive compensation.153
147 Roberta Romano, Public Pension Fund Activism in Corporate Governance Reconsidered, 93 COLUM. L. REV. 795,
799–800 & n.16 (1993).
148 Pension fund activism in the 1980s was concentrated in a small group of particularly engaged funds: the California
Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), the
New York City Employees’ Retirement System, the State of Wisconsin Investment Board (SWIB), and the Teachers
Insurance and Annuity Association of America-College Retirement Equities Fund (TIAA-CREF). Diane Del Guercio
& Jennifer Hawkins, The Motivation and Impact of Pension Fund Activism, 52 J. FIN. ECON. 293, 297 (1999). The
emergence of these funds as shareholder activists coincided with the creation of the Council of Institutional Investors
(CII)—a lobbying group for shareholder rights—in 1985. Gillan & Starks, supra note 107, at 42. CII’s founding
co-chairs were the California State Treasurer, the New York City Comptroller, and the chair of the SWIB. About CII,
COUNCIL OF INSTITUTIONAL INVESTORS https://www.cii.org/about https://perma.cc/7U78-SKJ2 (last visited Dec. 11,
2025).
149 Roberta Romano, Less is More: Making Institutional Investor Activism a Valuable Mechanism of Corporate
Governance, 18 YALE J. REGUL. 175, 175 (2001).
150 Gillan & Starks, supra note 108, at 43.
151 Stewart J. Schwab & Randall S. Thomas, Realigning Corporate Governance: Shareholder Activism by Labor
Unions, 96 MICH. L. REV. 1018, 1045 (1998).
152 Randall S. Thomas & Kenneth J. Martin, Should Labor Be Allowed to Make Shareholder Proposals?, 73 WASH. L.
REV. 41, 42–43 (1998).
153 Schwab & Thomas, supra note 151, at 1045, 1091–92.
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Takeover Defenses
The 1980s witnessed a wave of hostile takeover attempts—i.e., takeover attempts opposed by incumbent boards.
Almost a quarter of large U.S. companies received a hostile bid over the course of the decade, while many others
engaged in friendly deals in anticipation of a potential hostile offer. Gordon, infra note 160, at 1521. In many cases,
companies adopted defensive measures to ward off actual or potential raids. Common defenses included charter
provisions requiring supermajority votes to approve a merger and the issuance of multiple classes of stock with
different voting rights. Richard S. Ruback, An Overview of Takeover Defenses, in MERGERS AND ACQUISITIONS 49, 57,
60 (Alan J. Auerbach, ed. 1988). The most potent takeover defense, however, consists of a combination of a
poison pill and a staggered board. Lucian Arye Bebchuk et al., The Powerful Antitakeover Force of Staggered Boards:
Theory, Evidence, and Policy, 54 STAN. L. REV. 887, 890 (2002).
Poison pills (also called shareholder rights plans) are designed to deter hostile bids by causing substantial dilution
of a bidder’s holdings in the target if the bidder crosses a specified ownership threshold without the target board’s
approval. PAUL S. BIRD ET AL., TAKEOVERS: A STRATEGIC GUIDE TO MERGERS AND ACQUISITIONS § 11.03[A]
(4th ed. 2019). Poison pills effectuate this dilution by allowing the target’s shareholders (other than the bidder) to
purchase shares at a discount once the bidder crosses the relevant threshold. Id. § 11.03[A][2]. Companies convey
these rights as a dividend, allowing boards to implement poison pills without shareholder approval.
Id. § 11.03[A][1].
Standing alone, a poison pill does not preclude a hostile bidder from gaining control of a target. If a bidder can
replace a majority of incumbent directors via a proxy contest, its slate of directors can then redeem the typical
poison pill and allow the acquisition to proceed. Jordan M. Barry & John William Hatfield, Pills and Partisans:
Understanding Takeover Defenses, 160 U. PA. L. REV. 633, 644 (2012). This “ballot box safety valve” becomes less
accessible, however, if a company has a staggered board. Id. at 644–46. At companies with staggered boards,
directors are grouped into multiple classes, with only one class standing for election each year. Id. at 645.
Accordingly, absent certain shareholder rights (e.g., to remove directors without cause at a special meeting or by
written consent), the combination of a poison pill and staggered board functionally requires hostile bidders to
prevail in two consecutive proxy contests to complete an acquisition. Bebchuk et al., supra, at 899. These hurdles
are formidable: an empirical study from 2002 did not identify any instance in which a hostile bidder overcame a
staggered board by winning consecutive proxy contests. Id. at 928–29.
Delaware courts have given companies broad latitude to adopt and maintain poison pills, Moran v. Household Int’l,
Inc., 500 A.2d 1346 (Del. 1985), including in cases where a pill was paired with a staggered board, Air Prods. &
Chems. v. Airgas, Inc., 16 A.3d 48 (Del. Ch. 2011). As discussed below, however, shareholder activists have used
proposals to urge various restrictions on poison pills and pressure companies to de-stagger their boards.
The flowering of institutional investor activism during the 1980s and 1990s gave the shareholder
proposal rule newfound importance. To that point, few proposals garnered significant support. In
a 1981 speech, an SEC Commissioner observed that proposals opposed by management typically
received less than 10% of votes cast.154 The Commissioner also said that SEC staff recalled only
two instances in the history of the shareholder proposal rule in which such proposals obtained
majority votes.155 Institutional activism changed these dynamics. Between 1986 and 1990, more
than 20 governance proposals received majority votes in their favor.156 Those figures climbed
throughout the 1990s,157 with 33 proposals receiving majority support in 1998.158 Proposals
154 Bevis Longstreth, Comm’r, SEC, The SEC and Shareholder Proposals: Simplification in Regulation, Remarks to the
National Association of Manufacturers (Dec. 11, 1981), https://www.sec.gov/news/speech/1981/121181longstreth.pdf
https://perma.cc/PD3W-UHVH.
155 Id.
156 Romano, supra note 149, at 186; Jonathan M. Karpoff et al., Corporate Governance and Shareholder Initiatives:
Empirical Evidence, 42 J. FIN. ECON. 365, 368 (1996).
157 Kosmas Papadopoulos, The Long View: The Role of Shareholder Proposals in Shaping U.S. Corporate Governance
(2000-2018), HARV. L. SCH. F. ON CORP. GOV. (Feb. 6, 2019), https://corpgov.law.harvard.edu/2019/02/06/the-longview-the-role-of-shareholder-proposals-in-shaping-u-s-corporate-governance-2000-2018 https://perma.cc/F6TM6ZFU.
158 Andrew R. Brownstein & Igor Kirman, Can a Board Say No When Shareholders Say Yes? Responding to Majority
Vote Resolutions, 60 BUS. LAW. 23, 27 (2004).
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targeting takeover defenses were among the most popular, with proposals seeking to restrict the
use of poison pills receiving an average of 54% support in 1994.159
Several developments were responsible for this shift. One factor—perhaps the most
foundational—was growth in institutional shareholdings. In 1970, institutions owned roughly a
third of the U.S. stock market.160 By 1985, their share had grown to 55%.161 Whereas individual
shareholders voted at relatively low rates, institutional investors increasingly used their voting
power to advance their governance preferences.
Regulatory changes facilitated these efforts. In 1992, the SEC liberalized the proxy rules
governing inter-shareholder communications.162 The changes allowed shareholders not seeking
proxy authority to discuss potential proposals among themselves and seek support for proposals
without triggering the full panoply of regulations governing other types of proxy solicitations.163
The 1992 amendments are widely credited with making the regulatory climate more hospitable to
shareholder activism.164
Shareholder Proposals in the 21st Century
Governance Proposals
The trends discussed above accelerated in the 21st century. In 2003, 37% of governance proposals
that went to a vote received majority support.165 Proposals to de-stagger boards, remove
supermajority vote requirements, and restrict poison pills routinely obtained more than 60% of
votes cast.166 While most of these proposals were precatory, corporations grew increasingly
responsive to majority votes. One study of proposals that received majority support between 1997
and 2004 found that the rate at which companies implemented such proposals nearly doubled
after 2002 to more than 40%.167 Regulatory developments, the standardization of institutional
voting policies, and the governance climate of the early 2000s likely contributed to rising rates of
majority votes and companies’ increased responsiveness to such votes.
159 Id. at 28.
160 Jeffrey N. Gordon, The Rise of Independent Directors in the United States, 1950-2005: Of Shareholder Value and
Stock Market Prices, 59 STAN. L. REV. 1465, 1568 (2007).
161 Id.
162 Regulation of Communications Among Shareholders, Exchange Act Release No. 34-31326, 1992 WL 301258, at
*7–11 (Oct. 16, 1992).
163 Id.
164 E.g., Iman Anabtawi & Lynn Stout, Fiduciary Duties for Activist Shareholders, 60 STAN. L. REV. 1255, 1276–77
(2008).
165 Papadopoulos, supra note 157.
166 Id.
167 Yonca Ertimur et al., Board of Directors’ Responsiveness to Shareholders: Evidence from Shareholder Proposals,
16 J. CORP. FIN. 53 (2010).
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The regulatory changes involved mutual funds.168 Traditionally, mutual fund sponsors had been
less inclined to activism than public and union pension funds.169 Some commentators have
attributed this reticence to actual or prospective business relationships between mutual fund
sponsors and public companies.170 A fund sponsor that administers a company’s retirement plan
or sells a company other services, for example, may be reluctant to submit or support proposals
opposed by the company’s management.171
In 2003, the SEC adopted rules to address these potential conflicts of interest. One rule required
mutual funds to disclose their proxy voting policies and vote records.172 Disclosure of mutual
fund voting records prompted increased scrutiny of proposal votes and relationships between fund
sponsors and corporate management.173 Another rule required investment advisers—including
advisers to mutual funds—to implement policies and procedures reasonably designed to ensure
that they vote proxies in the best interests of their clients.174 Under the rule, the relevant policies
and procedures must address how advisers resolve material conflicts of interest with their
clients—for example, conflicts arising from business relationships between an adviser and a
company soliciting proxies.175 The adopting release accompanying the rule made clear that fund
sponsors cannot adopt a blanket policy of voting proxies in favor of the management of
companies with which they do business.176
The SEC’s 2003 rule targeting investment advisers is often highlighted as contributing to two
related trends that would shape the shareholder proposal ecosystem: the standardization of
institutional voting policies and the increased influence of proxy advisory firms.177 Proxy
advisors—firms that provide institutional investors with research, recommendations, and
administrative services related to proxy voting—first emerged in the 1980s.178 The SEC’s 2003
conflict-of-interest rule appeared to steer mutual fund sponsors in their direction, identifying
168 A mutual fund is a collective investment vehicle that pools money from public investors to purchase a portfolio of
stocks, bonds, and/or other financial assets. WILLIAM A. BIRDTHISTLE, EMPIRE OF THE FUND: THE WAY WE SAVE NOW
19 (2016). Mutual funds are created by investment advisers, which enter contracts to provide the funds with
management services in exchange for a fee based on a fund’s assets under management. Id. at 32–38. Mutual fund
investors receive the economic benefits of a fund’s performance net of fees. Under their advisory contracts, however,
mutual fund advisers typically have the right to vote shares held by the funds. Sean J. Griffith, Opt-In Stewardship:
Toward an Optimal Delegation of Mutual Fund Voting Authority, 98 TEX. L. REV. 983, 992 (2020).
In recent decades, a close cousin to mutual funds—the exchange-traded fund (ETF)—has grown in popularity.
CRS Report CRS Report R45318, Exchange-Traded Funds (ETFs): Issues for Congress, by Eva Su. As with mutual
funds, an ETF’s investment adviser typically has a contractual right to vote the shares in the fund’s portfolio. Danielle
Gurrieri, Pass-Through Voting, BROADRIDGE (2025), https://www.broadridge.com/article/wealth-management/passthrough-voting https://perma.cc/3CZG-Q94G (last visited Jan. 6, 2026). For ease of discussion, this report will use the
term “mutual fund” to refer to both mutual funds and ETFs.
169 Brownstein & Kirman, supra note 158, at 30.
170 Sean J. Griffith & Dorothy S. Lund, Conflicted Mutual Fund Voting in Corporate Law, 99 B.U. L. REV. 1151,
1176–81 (2019).
171 Id. at 1179.
172 Disclosure of Proxy Voting Policies and Proxy Voting Records by Registered Management Investment Companies,
68 Fed. Reg. 6564 (Feb. 7, 2003) (codified at 17 C.F.R. pts. 239, 249, 270, 274).
173 E.g., Gretchen Morgenson, A Door Opens. The View is Ugly, N.Y. TIMES (Sept. 12, 2004),
https://www.nytimes.com/2004/09/12/business/yourmoney/a-door-opens-the-view-is-ugly.html.
174 Proxy Voting by Investment Advisers, 68 Fed. Reg. 6585, 6588 (Feb. 7, 2003) (codified at 17 C.F.R. pt. 275).
175 Id.
176 Id. at 6588 n.24.
177 Andrew F. Tuch, Proxy Advisor Influence in a Comparative Light, 99 B.U. L. REV. 1459, 1468–69 (2019);
Brownstein & Kirman, supra note 158, at 35–38.
178 Douglas Sarro, Proxy Advisors as Issue Spotters, 15 BROOK. J. CORP. FIN. & COM. L. 371, 378 (2021).
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proxy advisors as a possible means by which fund sponsors could discharge their compliance
obligations. In the rule’s adopting release, the SEC explained that a fund adviser can demonstrate
compliance with the requirement to mitigate conflicts of interest by voting proxies “in accordance
with a pre-determined policy, based upon the recommendations of an independent third party.”179
The following year, SEC staff issued no-action letters addressing the circumstances in which
proxy advisors could be deemed “independent.”180 The 2003 rule and 2004 no-action letters are
broadly viewed as increasing demand for proxy advisors.181
Against this backdrop, institutional investors increasingly voted on shareholder proposals in
accordance with standardized policies.182 Mutual fund advisers confronted with hundreds of
proposals often deemed it uneconomical to evaluate individual proposals in light of
company-specific details, preferring to vote based on rules of thumb from their own in-house
guidelines or the recommendations of a proxy advisor.183 As a result, proposals tailored to
institutional voting policies were likely to obtain majority support.184 While mutual funds still
rarely submit proposals,185 their voting weight led them to become “the center of power in
corporate governance.”186
The standardization of institutional voting also pushed companies to be more responsive to
proposals that received majority votes. In the late 1990s and early 2000s, public and union
pension funds organized campaigns to vote against or withhold votes from directors at companies
that failed to implement proposals that received majority support.187 In 2000, one of the leading
proxy advisors—Institutional Shareholder Services (ISS)—moved in a similar direction, adopting
a policy of generally recommending that shareholders withhold votes from directors at companies
that had not implemented majority-supported proposals within certain timeframes.188 Today, the
other major proxy advisor—Glass, Lewis & Co. (Glass Lewis)—takes the position that “an initial
level of board responsiveness” in the form of engagement and disclosures is warranted when
proposals receive more than 30% support.189
The corporate climate of the early 2000s likewise encouraged boards to be more responsive to
shareholder preferences. That era was marred by a series of accounting scandals at major firms—
including Enron, WorldCom, and Tyco International—that prompted widespread anxiety about
the state of U.S. corporate governance.190 This wave of scandals drove the enactment of the
179 Proxy Voting by Investment Advisers, 68 Fed. Reg. at 6588.
180 Letter from Douglas Scheidt, Assoc. Dir. & Chief Counsel, Div. of Inv. Mgmt., SEC, to Mari Anne Pisarri, Pickard
& Djinis LLP (Sept. 15, 2004); Letter from Douglas Scheidt, Assoc. Dir. & Chief Counsel, Div. of Inv. Mgmt., SEC, to
Kent S. Hughes, Managing Dir., Egan-Jones Proxy Servs. (May 27, 2004). The SEC’s Division of Investment
Management withdrew the 2004 no-action letters in 2018. Statement Regarding Staff Proxy Advisory Letters, DIV. OF
INV. MGMT., SEC (Sept. 2018), https://www.sec.gov/divisions/investment/imannouncements/im-info-2018-02.pdf
https://perma.cc/3STT-2N3W.
181 E.g., Tuch, supra note 177, at 1468–69.
182 Brownstein & Kirman, supra note 158, at 35–38.
183
Id. at 37–38.
184 Id.
185 Lucian Bebchuk & Scott Hirst, Index Funds and the Future of Corporate Governance: Theory, Evidence, and
Policy, 119 COLUM. L. REV. 2029, 2101–05 (2019).
186 Griffith, supra note 168, at 984.
187 Brownstein & Kirman, supra note 158, at 45–49.
188 Id. at 50 & n.153.
189 GLASS LEWIS, 2025 BENCHMARK POLICY GUIDELINES at 16 (2025) [hereinafter GLASS LEWIS 2025 BENCHMARK
GUIDELINES].
190 BRIAN R. CHEFFINS, THE PUBLIC COMPANY TRANSFORMED 281–88 (2018).
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Sarbanes-Oxley Act in 2002 and a series of rule changes by the major stock exchanges.191 In the
eyes of many observers, it also created an environment in which boards sought to avoid the
perception that they were indifferent to shareholder concerns.192
Several governance trends sprouted from this milieu, including a decline in the number of
staggered boards and extensive adoption of majority voting for uncontested director elections,
advisory shareholder votes on executive compensation, and proxy access.
While shareholders had submitted proposals to de-stagger boards since the 1980s, support for
de-staggering proposals and companies’ responsiveness to those proposals increased sharply
post-2000.193 As a result, staggered boards have become far less common. In 2002, 61% of
S&P 500 companies had a staggered board; by 2022, that figure had fallen to 12%.194
The shift toward majority voting in uncontested director elections was similarly pronounced.
Most states have a default rule under which directors are elected based on a plurality voting
standard, but allow corporations to adopt an alternative standard in their charter or bylaws.195
Under a plurality voting standard, the director nominee who receives the most votes for a given
seat is elected.196 Accordingly, in an uncontested election governed by a plurality standard, a
nominee can be elected with only a single vote in his or her favor.197 In 2005, voting standards
emerged as a popular target for shareholder activists, who argued that the plurality rule—coupled
with the expense and rarity of proxy contests—rendered most director elections a purely
ceremonial exercise.198
Over the following years, shareholders submitted hundreds of proposals requesting that
corporations adopt alternative voting standards for uncontested director elections, including
standards requiring that nominees receive majority support to be elected.199 The campaign to
promote majority voting has been characterized as “one of the most popular and successful
191 Id. at 289–95.
192 Ertimur et al., supra note 167; Brownstein & Kirman, supra note 158, at 66–67.
193 John H. Matheson & Vilena Nicolet, Shareholder Democracy and Special Interest Governance, 103 MINN. L. REV.
1649, 1661 (2019).
194 Lynn S. Paine & Will Hurwitz, Brief Note on Staggered Boards, Harv. Bus. Sch. Background Note 323-040
(May 2024).
195 Stephen J. Choi et al., Does Majority Voting Improve Board Accountability?, 83 U. CHI. L. REV. 1119, 1125 (2016).
196 Id. at 1120–21.
197 Id.
198 Id. at 1125; Lucian A. Bebchuk, The Myth of the Shareholder Franchise, 93 VA. L. REV. 675, 682–86, 701–04
(2007) (documenting the rarity of proxy contests and advocating a default majority voting standard to complement
other suggested governance reforms).
199 Matheson & Nicolet, supra note 193, at 1663. There are three general alternatives to the traditional plurality
standard: (1) “plurality plus,” (2) majority voting with board-rejectable resignation, and (3) “consequential majority
voting.” Id. A plurality plus regime retains the plurality standard, but requires directors to tender conditional
resignations that are triggered by a failure to receive a majority of votes cast at the next election. Choi et al., supra note
195, at 1125–26. These regimes typically give boards discretion to reject a director’s resignation. William K. Sjostrom,
Jr. & Young Sang Kim, Majority Voting for the Election of Directors, 40 CONN. L. REV. 459, 480–81 (2007). Under a
“true majority” standard, director candidates are not elected unless they receive majority support. Mary Siegel, The
Holes in Majority Voting, 2011 COLUM. BUS. L. REV. 364, 368 (2011). Because most states have a “holdover” rule
allowing incumbent directors to remain in office until the occurrence of specified events—such as their resignation or
the election of a replacement director—true majority regimes usually include a requirement that incumbent directors
tender their resignations upon failing to secure reelection. Sjostrom & Kim, supra note 199, at 482–83. Almost all true
majority regimes give boards discretion to reject director resignations in these circumstances. COUNCIL OF INST.
INVESTORS FAQ: MAJORITY VOTING FOR DIRECTORS (2017) [hereinafter CII MAJORITY VOTING FAQ]. A handful of
companies, however, have adopted “consequential majority voting,” which requires directors who fail to secure
majority support to leave the board within a specified timeframe. Id.
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corporate governance reform efforts.”200 While few companies employed a majority voting
standard in 2005,201 nearly 90% of the S&P 500 had adopted majority voting by 2017.202
The push for advisory shareholder votes on executive compensation—often called “say on
pay”—was even more successful. Proposals requesting say on pay proliferated in the 2000s.203
Congress took notice. In 2009, the American Recovery and Reinvestment Act required companies
that received financial assistance from the Treasury Department’s Troubled Asset Relief Program
(TARP) to conduct annual say-on-pay votes while their obligations incurred under TARP
remained outstanding.204 The following year, the Dodd-Frank Act expanded say on pay.205 The
statute required companies subject to the SEC’s proxy rules to conduct advisory shareholder votes
on executive compensation at least every three years, in addition to a separate advisory vote every
six years on the frequency of say-on-pay votes.206 Most public companies conduct annual
say-on-pay votes,207 consistent with the voting guidelines of the leading proxy advisors and
several of the largest institutional investors.208
In the 2010s, proxy access joined the list of governance reforms that shareholders advocated
through proposals.209 Proxy access is a mechanism by which certain large long-term shareholders
are allowed to place their own director nominees on a company’s proxy card, avoiding some of
the costs of mounting a traditional proxy contest.210 This report defers a more detailed discussion
of proxy access to the subsection on Rule 14a-8’s election exclusion.211 For present purposes, it
suffices to note that shareholder proposals appear to have prompted many companies to adopt
proxy access. As of 2024, 85% of S&P 500 companies had adopted some form of proxy access,212
compared to less than 1% in 2014.213
The trends discussed above have been strongest among large-capitalization companies, which
receive the majority of shareholder proposals.214 Mid- and small-cap firms have adopted annual
200 Choi et al., supra note 195, at 1121. Although shareholder activists succeeded in securing widespread adoption of
majority voting, some commentators have doubted the significance of this change. E.g., Marcel Kahan & Edward
Rock, Symbolic Corporate Governance Politics, 94 B.U. L. REV. 1997, 2012–14 (2014); Siegel, supra note 199;
Sjostrom & Kim, supra note 199, at 487.
201 Choi et al., supra note 195, at 1121.
202 CII Majority Voting FAQ, supra note 199.
203 Matheson & Nicolet, supra note 193, at 1665.
204 12 U.S.C. § 5221(e).
205 15 U.S.C. § 78n-1(a)(1)–(2).
206 Id.
207 Pamela Marcogliese et al., When Do We Say What on Pay?, FRESHFIELDS (Mar. 20, 2023),
https://blog.freshfields.us/post/102iauh/when-do-we-say-what-on-pay https://perma.cc/CGW2-VBSF.
208 ISS, UNITED STATES PROXY VOTING GUIDELINES: BENCHMARK POLICY RECOMMENDATIONS 50 (2025); GLASS LEWIS
2025 BENCHMARK GUIDELINES, supra note 188, at 62; BLACKROCK, BLACKROCK INVESTMENT STEWARDSHIP: PROXY
VOTING GUIDELINES FOR BENCHMARK POLICIES – U.S. SECURITIES 15 (2025).
209 Holly J. Gregory et al., Proxy Access: A Five-Year Review, HARV. L. SCH. F. ON CORP. GOV. (Feb. 4, 2020),
https://corpgov.law.harvard.edu/2020/02/04/proxy-access-a-five-year-review https://perma.cc/FJ23-3VUE.
210 Proxy Access, COUNCIL OF INST. INVESTORS (accessed Dec. 16, 2025), https://www.cii.org/proxy_access
https://perma.cc/8BAH-XEAR (last visited Dec. 16, 2025).
211 See infra “Director Elections.”
212 Subodh Mishra, U.S. Shareholder Proposals: A Decade in Motion, HARV. L. SCH. F. ON CORP. GOV. (Nov. 18,
2024), https://corpgov.law.harvard.edu/2024/11/18/u-s-shareholder-proposals-a-decade-in-motion https://perma.cc/
D3JM-NDRM.
213 Gregory et al., supra note 209.
214 Kobi Kastiel & Yaron Nili, The Corporate Governance Gap, 131 YALE L.J. 782, 840 (2022).
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director elections, majority voting, and proxy access at much lower rates than their large-cap
counterparts.215 Many companies outside the S&P 500 thus continue to receive proposals
regarding these issues.216 In recent years, other common governance proposals include those
involving shareholders’ right to call special meetings, requests for an independent board chair,
and requests to eliminate supermajority vote requirements.217
Environmental and Social Proposals
Proposals involving environmental and social issues (E&S proposals) were slower to gain
significant traction with shareholders than governance proposals. Between 2000 and 2008,
median levels of support for E&S proposals hovered in the mid-single digits.218 After the 2008
financial crisis, however, E&S proposals began to exert a greater influence on corporate behavior.
Support levels for E&S proposals increased throughout the 2010s, as did the percentage of E&S
proposals that were withdrawn by their proponents before a meeting.219 Withdrawn proposals
often signal that a corporation has reached a settlement with the proponent, with the corporation
agreeing to take certain actions in exchange for the withdrawal of the proposal.220
The 2021 proxy season witnessed a large spike in support for environmental proposals, many of
which focused on climate change.221 That year, 46% of environmental proposals that went to a
vote received majority support.222 2021 also marked a record for the share of E&S proposals that
were withdrawn, with proponents pulling 49% of such proposals before a shareholder vote.223
During the following proxy seasons, however, support levels for E&S proposals—and the
percentage of E&S proposals that were withdrawn—declined from their 2021 peaks.224
Since 2017, the landscape for E&S proposals has been buffeted by shifts in SEC guidance that
have accompanied changes in presidential administration. The guidance has come in the form of
staff legal bulletins outlining the Division of Corporation Finance’s analytical approach to
no-action requests. This report provides a more detailed overview of the relevant bulletins in later
discussions of Rule 14a-8’s substantive exclusions.225 The overarching narrative, however, is that
SEC staff’s approach to the “ordinary business” and “relevance” exclusions under the
215 Id. at 827, 829, 833.
216 Don’t Forget the “G” in ESG (Because Your Shareholders Won’t), CONF. BD. (Feb. 14, 2022),
https://www.conference-board.org/topics/shareholder-voting/corporate-governance-proposals-brief-5 https://perma.cc/
BWY3-HXSC.
217 SULLIVAN & CROMWELL LLP, 2025 PROXY SEASON REVIEW: PART 1, at 15 (2025), https://www.sullcrom.com/
SullivanCromwell/_Assets/PDFs/Memos/2025-Proxy-Season-Review-Part-1.pdf
218 Kosmas Papadopoulos, The Long View: US Proxy Voting Trends on E&S Issues from 2000 to 2018, HARV. L. SCH.
F. ON CORP. GOV. (Jan. 31, 2019), https://corpgov.law.harvard.edu/2019/01/31/the-long-view-us-proxy-voting-trendson-es-issues-from-2000-to-2018/ https://perma.cc/A98V-6DVH.
219 Mishra, supra note 212.
220 Sarah C. Haan, Shareholder Proposal Settlements and the Private Ordering of Public Elections, 126 YALE L.J. 262,
264–65 (2016).
221 Mishra, supra note 212.
222 Id.
223 Id.
224 Kenneth Khoo & Roberto Tallarita, Expanding Shareholder Voice: The Impact of SEC Guidance on Environmental
and Social Proposals, J. L. & ECON (forthcoming).
225 See infra “Relevance” and “Ordinary Business.”
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Biden Administration allowed for a broader range of E&S proposals than its approach under the
first and second Trump Administrations.226
In recent years, common subjects for E&S proposals have included climate change, “diversity,
equity, and inclusion” (DEI), corporate lobbying and political expenditures, and human rights
issues.227 These types of E&S proposals have assumed greater salience alongside the rise of what
is often called “ESG” investing and activism. While “ESG”—an abbreviation for “environmental,
social, and governance”—does not have a universally agreed-upon meaning,228 it often “operates
as something of an umbrella term” for two distinct approaches to investing and activism.229 One
variant of ESG involves investors forgoing “some degree of profit-seeking” and instead
“demanding more prosocial behavior from portfolio companies, either by divesting from bad
actors, or by using their voting power to influence corporate policy.”230 This strand of ESG is a
form of “concessionary” investing because it involves sacrificing financial returns to promote
non-pecuniary objectives.231 Another category of ESG investing and activism involves the
consideration or promotion of environmental, social, and governance factors as a means of
improving risk-adjusted financial returns.232 Investors employing this strategy might believe that
companies with strong environmental records or diverse boards exhibit better long-term financial
performance than other firms.233
ESG investing and E&S shareholder proposals have generated controversy.234 Critics argue that
many E&S proposals are driven by concessionary objectives that harm corporate financial
226 Some commentators have argued that the SEC’s greater receptiveness toward prescriptive E&S proposals during the
Biden Administration—reflected in 2021 guidance—was responsible for the decline in support for E&S proposals in
2022 and 2023. Their theory is that the 2021 guidance encouraged shareholders to submit more prescriptive
proposals—for example, proposals requesting that a company adopt specific targets for carbon emissions, as opposed
to those requesting that a company publish a report regarding its emission-reduction efforts. Prescriptive proposals have
tended to enjoy less shareholder support than non-prescriptive proposals. Khoo & Tallarita, supra note 224; Cydney
Posner, More prescriptive proposals, less support for 2022 proxy season, COOLEY LLP (Aug. 4, 2022),
https://cooleypubco.com/2022/08/04/prescriptive-proposals-2022/ https://perma.cc/Q8RV-WWYN.
227 Mishra, supra note 212.
228 Ann M. Lipton, Will the Real Shareholder Primacy Please Stand Up?, 137 HARV. L. REV. 1584, 1594 (2024)
(reviewing STEPHEN M. BAINBRIDGE, THE PROFIT MOTIVE: DEFENDING SHAREHOLDER VALUE MAXIMIZATION (2023))
(indicating that the phrase “ESG investing” has become “somewhat infamous for its malleability”); Elizabeth Pollman,
The Making and Meaning of ESG, 14 HARV. BUS. L. REV. 403, 436–37 (2024) (noting that the term “ESG” lacks a clear
definition and has been used for a range of different purposes); Max M. Schanzenbach & Robert H. Sitkoff,
Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee, 72 STAN.
L. REV. 381, 397 (2020) (explaining that the term “ESG investing” is “inherently ambiguous” and distinguishing
between different variants of that concept).
229 Lipton, supra note 228, at 1594.
230 Id.; see also Aneil Kovvali & Yair Listokin, Valuing ESG, 49 BYU L. REV. 705, 719 (2024) (distinguishing between
“an instrumental approach to ESG” that seeks long-term profits and “a more pluralistic approach to ESG” that is
“prepared to sacrifice profits simply to advance an environmental or social cause”); Schanzenbach & Sitkoff, supra
note 228, at 388, 397 (noting that one version of ESG investing is “motivated by providing a benefit to a third party or
otherwise for moral or ethical reasons”).
231 FREDERICK H. ALEXANDER, BENEFIT CORPORATION LAW AND GOVERNANCE: PURSUING PROFIT WITH PURPOSE 45
(2018) (distinguishing between concessionary and non-concessionary investing).
232 Lipton, supra note 228, at 1594.
233 DOUGLAS M. GRIM & DANIEL B. BERKOWITZ, VANGUARD, ESG, SRI, AND IMPACT INVESTING: A PRIMER FOR
DECISION-MAKING, at 17 (2020), https://www.ch.vanguard/content/dam/intl/europe/documents/en/esg-a-primer-fordecision-making-eu-en-pro.pdf https://perma.cc/2XP5-RFHL (describing an “ESG integration” strategy that involves
the incorporation of “material climate-change risks” into assessments of asset valuations with an objective of
improving risk-adjusted returns).
234 Almost all of this controversy focuses on the “E” and “S” in “ESG.” Notwithstanding the rise of “ESG” as a
(continued...)
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performance.235 Much of the debate surrounding E&S proposals involves the role of
intermediaries such as mutual fund sponsors and proxy advisors.236 These issues—which have
attracted the attention of the White House, the SEC, and multiple congressional subcommittees—
are discussed in greater detail later in this report.237
In addition to receiving scrutiny from policymakers, ESG activism has catalyzed a wave of what
are often called “anti-ESG” shareholder proposals.238 Examples of anti-ESG proposals include
requests that corporations consider ending DEI initiatives or prepare reports on the risks of
carbon-mitigation commitments.239 While recent proxy seasons have seen a surge in anti-ESG
proposals, such proposals have generally received low levels of shareholder support.240
The Future of Shareholder Proposals
As of this writing, the shareholder proposal rule may be approaching an inflection point. In an
October 2025 speech, SEC Chairman Paul Atkins signaled a potential departure from the SEC’s
longstanding approach to precatory proposals, questioning whether such proposals are proper as a
matter of Delaware law.241 Chairman Atkins also expressed “high confidence” that SEC staff
would grant no-action requests seeking to exclude precatory proposals as improper under
Delaware law if such requests are supported by an opinion of counsel.242 This possible change
could have major ramifications; according to some estimates, precatory proposals constitute
roughly 98% of proposals submitted in a typical proxy season.243
The following month, the SEC’s Division of Corporation Finance announced that it would not
respond “substantively” to no-action requests for the 2025-2026 proxy season, except for requests
seeking to exclude proposals as improper subjects for shareholder action.244 In its announcement,
the Division of Corporation Finance cited “current resource and timing considerations following
the lengthy government shutdown,” along with the availability of an “extensive body of
guidance” on shareholder proposals.245 While SEC staff will not respond “substantively” to
concept, it remains standard to distinguish between governance proposals and E&S proposals—a convention that this
report follows. E.g., Haan, supra note 220, at 300.
235 STAFF OF ESG WORKING GRP., H. COMM. ON FIN. SERVS., 118TH CONG., THE FAILURE OF ESG: AN EXAMINATION OF
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FACTORS IN THE AMERICAN BOARDROOM AND NEEDED REFORMS at 9–10
(2024).
236 Caleb Griffin, Margins: Estimating the Influence of the Big Three on Shareholder Proposals, 73 SMU L. REV. 409,
411 (2020) (finding that the “Big Three” index fund managers—BlackRock, Vanguard, and State Street—individually
have the potential to determine a significant proportion of proxy votes and together possess the power to decide the
outcome of most shareholder proposal votes).
237 See infra “Corporate Social Responsibility.”
238 Liz Walsh et al., Anti-ESG Shareholder Proposals in 2025, HARV. L. SCH. F. ON CORP. GOV. (June 18, 2025),
https://corpgov.law.harvard.edu/2025/06/18/anti-esg-shareholder-in-2025/ https://perma.cc/GG27-X85N.
239 Id.
240 Id.
241 Atkins Speech, supra note 8.
242 Id.
243 Sanford Lewis & Khadija Foda, The SEC, Delaware and the High Stakes for Investors on Advisory Shareholder
Proposals, HARV. L. SCH. F. ON CORP. GOV. (Nov. 20, 2025), https://corpgov.law.harvard.edu/2025/11/20/the-secdelaware-and-the-high-stakes-for-investors-on-advisory-shareholder-proposals/ https://perma.cc/LW7K-HTJU.
244 Div. of Corp. Fin., SEC, Statement Regarding the Division of Corporation Finance’s Role in the Exchange Act Rule
14a-8 Process for the Current Proxy Season (Nov. 17, 2025), https://www.sec.gov/newsroom/speeches-statements/
statement-regarding-division-corporation-finances-role-exchange-act-rule-14a-8-process-current-proxy-season
https://perma.cc/XH28-Y2JS.
245 Id.
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no-action requests (other than those implicating the “improper subject” exclusion), it will provide
companies with letters indicating that the Division of Corporation of Finance does not object to
decisions to exclude proposals, provided companies represent that they have a “reasonable basis”
for excluding the proposals under Rule 14a-8.246
Chairman Atkins’ October 2025 speech also suggested other possible changes to the shareholder
proposal regime. Endorsing a view previously expressed by SEC Commissioner Mark Uyeda,247
Chairman Atkins argued that existing law permits companies to adopt their own “procedural”
standards for shareholder proposals in their governing documents.248 He also announced that, in
his view, “a fundamental reassessment of Rule 14a-8 is in order,” and that the SEC “should
re-evaluate the rule’s fundamental premise that shareholders should be able to force companies to
solicit for their proposals” at little or no personal expense.249
The SEC’s regulatory flexibility agenda forecasts proposed amendments to Rule 14a-8 in the
spring of 2026.250
The SEC No-Action Process
As discussed, the SEC no-action process has long been an integral feature of the shareholder
proposal regime. While the SEC has on multiple occasions considered changes to Rule 14a-8 that
would reduce the agency’s role in the shareholder proposal process, corporations and shareholder
groups alike have successfully resisted such efforts.251 The SEC thus remains a central player in
disputes over the excludability of shareholder proposals, reviewing hundreds of no-action
requests each year.252
The SEC no-action process is not the product of a legal mandate. Although Rule 14a-8 requires
corporations that plan to omit a shareholder proposal from their proxy materials to notify the SEC
and explain the basis for the omission no later than 80 days before filing a definitive proxy
statement,253 the rule does not require corporations to seek or obtain a favorable no-action
response before omitting a proposal. Nevertheless, in pursuit of regulatory clarity, companies
generally file their reasons for excluding a proposal in the form of a request for no-action relief.254
The SEC is not required to answer such requests.255 Rather, the SEC has explained that it
responds to no-action requests “as a convenience to both companies and shareholders” to assist
246 Id.
247 Mark T. Uyeda, Comm’r, SEC, Remarks at the Society for Corporate Governance 2023 National Conference (June
21, 2023) [hereinafter Uyeda Speech], https://www.sec.gov/newsroom/speeches-statements/uyeda-remarks-societycorporate-governance-conference-062123 https://perma.cc/L76G-VCLW.
248 Atkins Speech, supra note 8. The extent to which companies can adopt their own procedural and substantive
standards for shareholder proposals is discussed in “Private Ordering” infra.
249 Id.
250 SEC Regulatory Flexibility Agenda, supra note 9.
251 1998 Amendments, supra note 142, at *2 (discussing resistance to changes that would have diminished SEC staff’s
role as “informal arbiters” of the excludability of shareholder proposals).
252 Elizabeth A. Ising, Ronald O. Mueller & Geoffrey Walter, 2025 Shareholder Proposal Season: A First Glimpse at
Key No-Action Request Results, HARV. L. SCH. F. ON CORP. GOV. (June 14, 2025), https://corpgov.law.harvard.edu/
2025/06/14/2025-shareholder-proposal-season-a-first-glimpse-at-key-no-action-request-results/ https://perma.cc/P4CRS5NV.
253 17 C.F.R. § 240.14a-8(j)(1).
254 Haseley & Ising, supra note 65 § 12.03[A].
255 SEC Staff Legal Bulletin No. 14 (July 13, 2001) [hereinafter SLB 14], https://www.sec.gov/interps/legal/
cfslb14.htm https://perma.cc/YPG6-NTL9.
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them in complying with the proxy rules.256 The proponent of a shareholder proposal may provide
the SEC with a response to the company’s arguments for excludability, but is not required to do
so.257 Corporations bear the burden of demonstrating that they are entitled to exclude a proposal
from their proxy materials.258
SEC staff typically offers one of three responses to requests for no-action relief:
•
that there “appears to be some basis” for a company’s view that it may exclude a proposal
from its proxy materials and that SEC staff therefore will not recommend an enforcement
action if the company omits the proposal;
•
that SEC staff is “unable to concur” in the company’s view that it may exclude the
proposal and that SEC staff disagrees with the asserted basis for exclusion; or
•
that SEC staff expresses “no view” regarding the company’s intention to omit the
proposal from its proxy materials.259
As discussed in several sections below, if SEC staff identifies deficiencies in a proposal that can
be cured, it may permit the proponent to remedy the deficiencies and resubmit the proposal.260
Often, no-action responses are limited to a statement of SEC staff’s enforcement posture and do
not include detailed explanations of the staff’s reasoning.261
Corporations and shareholders can seek reconsideration of a no-action response by SEC staff, but
such requests are rarely successful.262 Cases in which SEC staff have granted such requests
include those in which a party submitted new or additional facts not provided in the original
no-action request; obtained a legal opinion to support arguments based on state, federal, or
foreign law where it had previously not provided one; or raised additional arguments for
exclusion not presented in the original no-action request.263
Parties can also seek review of no-action responses by the SEC.264 The agency’s regulations
provide that SEC staff may, upon request or on its own motion, present questions to the SEC that
involve “matters of substantial importance” where “the issues are novel or highly complex.”265
The decision to present questions to the SEC is entirely within the discretion of SEC staff,266 and
requests for SEC review of no-action responses are seldom granted.267
256 Id.
257 17 C.F.R. § 240.14a-8(k).
258 Id. § 240.14a-8(g).
259 SLB 14, supra note 255. SEC staff may express no view on a company’s intention to omit a proposal in cases where
the arguments raised in a no-action request are the subject of litigation. Id.
260 ARANOW & EINHORN ON PROXY CONTESTS FOR CORPORATE CONTROL § 16.02 (3d ed. 2001) [hereinafter ARANOW &
EINHORN].
261 Proxy Power and Proposal Abuse, Hearing Before the H. Comm. on Fin. Servs., 119th Cong. 8 (Sept. 10, 2025)
(statement of Ronald Mueller, Partner, Gibson Dunn & Crutcher LLP) [hereinafter Mueller Testimony].
262 KEIR D. GUMBS & LILLIAN BROWN, BLOOMBERG BNA, SHAREHOLDER PROPOSALS, at A-25–26 (2018).
263 Id. at A-26.
264 Courtney Bartkus, Appealing No-Action Responses under Rule 14a-8: Informal Procedures of the SEC and the
Availability of Meaningful Review, 93 DENV. L. REV. F. 199, 203 (2016).
265 17 C.F.R. § 202.1(d).
266 Id.
267 Bartkus, supra note 264, at 203.
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SEC no-action responses are not binding on any party.268 They reflect only the informal views of
SEC staff, which has advised that such responses “do not and cannot adjudicate the merits of a
company’s position” with respect to a shareholder proposal.269 “Only a court,” SEC staff has
explained, “can decide whether a shareholder proposal can be excluded from a company’s proxy
materials.”270 Accordingly, no-action responses do not preclude a company or the proponent of a
proposal from pursuing its rights via litigation.271
Shareholders that litigate a company’s exclusion of a proposal usually seek a temporary
restraining order or preliminary injunction in federal district court to prevent a company from
distributing its proxy materials without the proposal.272 A company may also seek a declaratory
judgment that it is permitted to omit a proposal.273 The SEC can bring enforcement actions
against companies that improperly exclude proposals from their proxy materials, but such actions
are very rare.274
Despite the availability of litigation as an option for resolving disputes over shareholder
proposals, most companies and proponents accept no-action responses as the final word on
whether a proposal may be omitted.275 As a result, SEC staff has a major influence on which
proposals are ultimately presented for a shareholder vote.
In most years, a significant percentage of submitted proposals are withdrawn, which often signals
a settlement between a company and the proponent of the withdrawn proposal.276 These
settlements remain an opaque area within the shareholder proposal regime; proposal settlements
are not subject to SEC oversight and there is no central repository of settlement agreements.277
Proposal settlements are akin to contracts between a corporation and the proponent of a proposal,
with the corporation agreeing to take certain actions in exchange for the withdrawal of the
proposal.278 While the terms and even the existence of many shareholder proposal settlements are
private, some settlement agreements include disclosure commitments involving issues such as
political expenditures, the environmental effects of a company’s operations, and human rights
standards.279
268 Roosevelt v. E.I. Du Pont de Nemours & Co., 958 F.2d 416, 423 (D.C. Cir. 1992).
269 Div. of Corp. Fin., Informal Procedures Regarding Shareholder Proposals, SEC (Nov. 21, 2022),
https://www.sec.gov/rules-regulations/shareholder-proposals/division-corporation-finance-informal-proceduresregarding-shareholder-proposals https://perma.cc/S2G3-BNVK.
270 Id.
271 Id. Some courts have said that SEC no-action letters, while not binding, constitute persuasive authority. Schatzki v.
Weiser Capital Mgmt., LLC, 2016 WL 6662264 at *5 (S.D.N.Y. Nov. 9, 2016); Apache Corp. v. New York City Emp.
Ret. Sys., 621 F. Supp. 2d 444, 449 (S.D. Tex. 2008).
272
Haseley & Ising, supra note 65 § 12.03[I]. In 1992, the U.S. Court of Appeals for the D.C. Circuit held that
shareholders have a private right of action under Rule 14a-8, confirming the existence of a right that had previously
been “widely assumed.” Roosevelt, 958 F.2d at 419.
273 Haseley & Ising, supra note 65 § 12.03[I].
274 Id.
275 Mueller Testimony, supra note 261, at 6.
276 Mishra, supra note 212.
277 Haan, supra note 220, at 277.
278 Id. at 264.
279 Id. at 267–68.
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Eligibility and Procedural Requirements
Rule 14a-8 includes a variety of eligibility and procedural requirements. To be eligible to submit
a proposal under the rule, a shareholder must meet certain ownership thresholds, which the SEC
made more restrictive in 2020.280 Under the tiered approach adopted in 2020, eligible
shareholders must have continuously held
•
at least $2,000 in market value of the relevant company’s securities entitled to
vote on the proposal for at least three years;
•
at least $15,000 in market value of the company’s securities entitled to vote on
the proposal for at least two years; or
•
at least $25,000 in market value of the company’s securities entitled to vote on
the proposal for at least one year.281
The proponent of a proposal must provide the company with evidence documenting its
eligibility.282 Proponents must also provide the company with written statements that they
(1) intend to hold the requisite amount of securities through the date of the meeting for which
they submit a proposal, and (2) are able to meet with the company in person or via
teleconference.283 In offering to meet with the company, proponents must identify specific days
and times within the regular business hours of the company’s principal executive office that they
are available.284
Rule 14a-8 limits proponents to one proposal per company for a particular meeting.285 Proposals
and accompanying statements must not exceed 500 words and must be received by the company
at least 120 days before the one-year anniversary of the company’s distribution of its proxy
statement for the previous year’s annual meeting.286
Shareholder proponents or their representatives must appear in person at the shareholder meeting
to present their proposals.287 If the proponent of a proposal fails to abide by this requirement
without good cause, the company may exclude the proponent’s proposals from its proxy materials
for any meetings held in the following two calendar years.288
If a company seeks to omit a proposal on eligibility or procedural grounds, it must notify the
proponent within 14 days of receiving the proposal, unless the deficiency cannot be remedied
280 17 C.F.R. § 240.14a-8(b); Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8,
85 Fed. Reg. 70240 (Nov. 4, 2020) (codified at 17 C.F.R. pt. 240).
281 17 C.F.R. § 240.14a-8(b)(1)(i). In June 2025, a federal district court rejected a lawsuit alleging that the SEC’s 2020
amendments to Rule 14a-8 violated the Administrative Procedure Act. Interfaith Ctr. on Corp. Resp. v. SEC, 768
F. Supp. 3d 97 (D.D.C. 2025).
282 17 C.F.R. § 240.14a-8(b)(2).
283 Id. § 240.14a-8(b)(1)(ii)–(iii).
284 Id. § 240.14a-8(b)(1)(iii).
285 Id. § 240.14a-8(c).
286 Id. § 240.14a-8(d), (e)(2). If the company did not hold an annual meeting the previous year or if the date of the
annual meeting has been changed by more than 30 days from the date of the previous year’s meeting, the deadline is “a
reasonable time before the company begins to print and send its proxy materials.” Id. § 240.14a-8(e)(2).
287 Id. § 240.14a-8(h)(1).
288 Id. § 240.14a-8(h)(2).
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(e.g., because the proponent submitted the proposal after the deadline).289 Proponents must
correct deficiencies within 14 days of receiving notice from the company.290
Substantive Exclusions
Improper Subject for Shareholder Action
Rule 14a-8(i)(1) permits a company to exclude a proposal that is not a “proper subject for action
by shareholders” under the laws of the jurisdiction of the company’s organization.291 This
“improper subject” exclusion is the oldest substantive exclusion in the shareholder proposal
rule.292 While the exclusion turns on the application of state law, there is little state law precedent
directly addressing which issues qualify as “proper” subjects for shareholder action.293 As a result,
in administering the “improper subject” exclusion, SEC staff has developed something akin to its
own common law on that topic.294 Two categories of proposals have emerged from this process:
precatory proposals and bylaw amendments.
Precatory Proposals
State corporate law vests managerial authority in boards of directors, not shareholders.295 That
principle underpins the following note to Rule 14a-8(i)(1):
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 [i.e., the SEC’s] 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.296
Proposals framed as recommendations or requests, often called precatory proposals, constitute the
overwhelming majority of shareholder proposals submitted in a typical year.297
The SEC’s approach to precatory proposals appears to be changing. In an October 2025 speech,
SEC Chairman Paul Atkins signaled a potential departure from the above text, questioning
whether precatory proposals in fact constitute “proper subjects” for shareholder action under
Delaware law.298 In posing that question, Chairman Atkins cited a forthcoming law review article
by a Delaware attorney concluding that Delaware law does not give shareholders an “inherent
289 Id. § 240.14a-8(f).
290 Id.
291
Id. § 240.14a-8(i)(1). Requests for no-action relief that are based on state or international law must be accompanied
by an opinion of counsel. Id. § 240.14a-8(j)(iii).
292 Solicitation of Proxies Under the Act, 7 Fed. Reg. 10655, 10656 (Dec. 22, 1942).
293 Med. Comm. for Human Rts. v. SEC, 432 F.2d 659, 677 (D.C. Cir. 1970).
294 Id.
295 DEL. CODE ANN. tit. 8, § 141(a); MODEL BUS. CORP. ACT § 8.01(b).
296 17 C.F.R. § 240.14a-8(i)(1) note.
297 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, 115 (2021).
298 Atkins Speech, supra note 8.
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right” to submit precatory proposals.299 If this conclusion is correct, Chairman Atkins continued,
and a corporation has not created such a right in its governing documents, “then one could make
an argument that a precatory shareholder proposal submitted to a Delaware company is
excludable under [Rule 14a-8(i)(1)].”300 Chairman Atkins then indicated that, if a company makes
this argument in a no-action request accompanied by an opinion of counsel, the company “should
prevail.”301 He also expressed “high confidence” that SEC staff will honor this position.302
The approach outlined by Chairman Atkins may have significant implications for the shareholder
proposal regime. According to some estimates, precatory proposals constitute roughly 98% of
proposals submitted in a typical proxy season.303 Thus, if precatory proposals are improper under
state law, nearly all shareholder proposals submitted in recent years would have been
excludable.304 The extent to which companies would take advantage of this expanded exclusion,
however, remains uncertain. The prospect of receiving negative attention from shareholder
activists and proxy advisors may deter some corporations from adopting a categorical stance
against all precatory proposals.305 Additionally, shareholders may respond to the change discussed
by Chairman Atkins by proposing bylaw amendments authorizing precatory proposals.306
Delaware courts (and courts applying the laws of other states) would likely prove to be the final
arbiters of the propriety of precatory proposals.307 Chairman Atkins appeared to contemplate this
possibility in his October 2025 speech, noting that Delaware’s constitution allows the SEC to
certify questions to the Delaware Supreme Court.308
It is unclear how the Delaware Supreme Court would rule on the propriety of precatory proposals.
Section 211(b) of the Delaware General Corporation Law (DGCL) requires corporations to hold
annual meetings at which directors are elected and provides that “[a]ny other proper business may
be transacted at the annual meeting.”309 The DGCL does not define “proper business,” however,
and there is little case law addressing that issue.310 The DGCL and Delaware judicial decisions
thus do not appear to authorize or prohibit precatory proposals explicitly.311 The forthcoming law
299 Kyle Pinder, The Non-Binding Bind: Reframing Precatory Stockholder Proposals under Delaware Law, 15 MICH.
BUS. & ENTREPRENEURIAL L. REV. (forthcoming), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5418534
https://perma.cc/LAX3-KWWN.
300 Atkins Speech, supra note 8.
301 Id.
302 Id.
303 Lewis & Foda, supra note 243.
304 S&C Memo, supra note 63.
305 Ryan J. Adams et al., SEC Chairman Atkins Casts Doubt on the Validity of Precatory Shareholder Proposals,
MORRISON & FOERSTER LLP (Oct. 10, 2025), https://www.mofo.com/resources/insights/251010-sec-doubt-validityprecatory-shareholder-proposals https://perma.cc/NN7Q-PWZ8.
306 Jill Fisch et al., Stockholder Proposals—Law and Policy Considerations, HARV. L. SCH. F. ON CORP. GOV. (Dec. 9,
2025), https://corpgov.law.harvard.edu/2025/12/09/stockholder-proposals-law-and-policy-considerations/
https://perma.cc/S2WT-RDPL.
307 John Filar Atwood, Atkins Remarks May Not be Death Knell for Precatory Proposals, Panelists Say, VITALLAW
(Nov. 10, 2025), https://www.vitallaw.com/news/proxies-atkins-remarks-may-not-be-death-knell-for-precatoryproposals-panelists-say/sld01a5e5302bf1ad48c5a2fdec208fbaf2f5 https://perma.cc/89NT-3HKD.
308 Atkins Speech, supra note 8.
309 DEL. CODE ANN. tit. 8, § 211(b).
310 Mohsen Manesh, The Corporate Contract & The Private Ordering of Shareholder Proposals, 50 J. CORP. L. 1, 29
(2024).
311 Brett McDonnell, Shareholder Bylaws, Shareholder Nominations, and Poison Pills, 3 BERKELEY BUS. L.J. 205, 254
(2005) (explaining that precatory proposals “have only a shadowy presence in state law,” with nothing authorizing or
forbidding them).
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review article that Chairman Atkins referenced in his speech argues that this doctrinal silence
should be interpreted as militating against an “inherent right” to submit precatory proposals given
Delaware’s board-centric governance model and prioritization of private ordering.312
Others have contested this analysis, contending that the right to present and vote on precatory
proposals is grounded in Section 121 of the DGCL and the overall governance scheme created by
the statute.313 Section 121 of the DGCL provides that corporations and their officers, directors,
and shareholders shall possess powers that are “incidental” to certain expressly granted powers
“so far as such [incidental] powers and privileges are necessary or convenient to the conduct,
promotion or attainment of the business or purposes set forth in [a corporation’s] certificate of
incorporation.”314 Some commentators have argued that Section 121, read together with other
DGCL provisions—including those involving director elections, director removal, and
shareholder voting rights—suggests that shareholders have an “incidental” power to submit and
vote on advisory resolutions.315 Defenders of precatory proposals have also cited case law from
Delaware and other states that, in their view, supports such a power.316
Bylaw Amendments
A corporation’s organizing documents consist of its charter (sometimes called the certificate or
articles of incorporation) and bylaws.317 The charter defines “the broad and general aspects of the
corporate entity’s existence and nature.”318 Charters must include certain basic information—for
example, the corporation’s name and number of authorized shares.319 The DGCL provides that
charters may also include any provisions defining the powers of the corporation, directors, and
shareholders as long as such provisions are not contrary to Delaware law.320 Most states,
including Delaware, provide that charter amendments must be initiated by the board of directors
and then approved by shareholders.321 Because most states do not allow shareholders to initiate
charter amendments, shareholder proposals advocating charter amendments typically must be
phrased as requests that the board “take the steps necessary” to amend the charter in specified
ways.322
A corporation’s bylaws “are generally regarded as the proper place for the self-imposed rules and
regulations deemed expedient for its convenient functioning to be laid down.”323 Matters
commonly addressed in bylaws include annual meetings, board size, director resignations, board
vacancies, and indemnification rights.324 Most states, including Delaware, allow shareholders to
312 Pinder, supra note 299.
313 Fisch et al., supra note 306.
314 DEL. CODE ANN. tit. 8, § 121.
315 Fisch et al., supra note 306.
316 Id.
317 DEL. CODE ANN. tit. 8, §§ 102, 109; MODEL BUS. CORP. ACT §§ 2.02, 2.06 (2025).
318 Gow v. Consol. Coppermines Corp., 165 A. 136, 140 (Del. Ch. 1933).
319 DEL. CODE ANN. tit. 8, § 102(a)(1), (a)(4); MODEL BUS. CORP. ACT § 2.02(a)(1)-(2).
320 DEL. CODE ANN. tit. 8, § 102(b)(1).
321 Id. § 242(b); MODEL BUS. CORP. ACT § 10.03.
322 SEC Staff Legal Bulletin No. 14D (Nov. 7, 2008) [hereinafter SLB 14D], https://www.sec.gov/rules-regulations/
staff-guidance/staff-legal-bulletins/shareholder-proposals-staff-legal-bulletin-no-14d-cf https://perma.cc/9MHYVCMJ.
323 Gow, 165 A. at 140.
324 Megan Wischmeier Shaner, Interpreting Organizational “Contracts” and the Private Ordering of Public Company
(continued...)
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amend the bylaws on their own initiative without board approval.325 The DGCL also allows
corporations to adopt charter provisions granting their boards concurrent authority to amend
bylaws,326 and almost all public corporations do so.327 Under Delaware law, the adoption of a
charter provision permitting the board to amend the bylaws does not divest shareholders of that
power.328 Because shareholders have this statutory right in most states, bylaw amendment
proposals are the exception to the general principle that shareholder proposals must be phrased in
precatory form to be proper under state law.329
Shareholders’ bylaw-amendment power is not without limit, however. Bylaw proposals frequently
implicate unsettled issues of state law because of the tension between two types of statutory
provisions. On the one hand, as discussed, state corporate statutes vest managerial authority in
boards of directors.330 Section 141(a) of the DGCL, for example, provides that
[t]he business and affairs of every corporation ... shall be managed by or under the
direction of a board of directors, except as may be otherwise provided in this chapter or
in its certificate of incorporation.331
As the note to Rule 14a-8(i)(1) reflects, Section 141(a) and similar provisions in other states have
traditionally been understood as preventing shareholders from dictating specific business
decisions.332
On the other hand, state corporate statutes generally impose few explicit limits on shareholders’
power to adopt bylaw amendments. Section 109(b) of the DGCL, for example, prohibits
fee-shifting bylaws involving litigation over internal corporate claims, but otherwise provides that
bylaws may include
any provision, not inconsistent with law or with the certificate of incorporation, relating
to the business of the corporation, the conduct of its affairs, and its rights or powers or
the rights or powers of its stockholders, directors, officers or employees.333
The scope of shareholders’ bylaw-amendment power is not obvious from the plain text of these
provisions. Section 109(b) says that bylaws cannot be “inconsistent with law,” meaning
Section 141(a)—which provides for board management—may limit the ways in which
shareholder-adopted bylaws can restrict board authority.334 A shareholder-adopted bylaw
requiring a corporation to buy or sell a certain type of product, for example, would likely be
inconsistent with the proposition that boards—not shareholders—have managerial authority.335
Governance, 60 WM. & MARY L. REV. 985, 994 (2019). Bylaws must be consistent with state law and a company’s
charter. DEL. CODE ANN. tit. 8, § 109(b).
325 DEL. CODE ANN. tit. 8, § 109(a); MODEL BUS. CORP. ACT § 10.20(a).
326 DEL. CODE ANN. tit. 8, § 109(a). In some other states, boards have this power by default. MODEL BUS. CORP.
ACT § 10.20(b).
327 Ann M. Lipton, Manufactured Consent: The Problem of Arbitration Clauses in Corporate Charters and Bylaws,
104 GEO. L.J. 583, 589 n.25 (2016).
328 DEL. CODE ANN. tit. 8, § 109(a).
329 See HONABACH & SARGENT, supra note 67 § 5:51.
330 DEL. CODE ANN. tit. 8, § 141(a); MODEL BUS. CORP. ACT § 8.01(b).
331 DEL. CODE ANN. tit. 8, § 141(a).
332 17 C.F.R. § 240.14a-8(i)(1) note.
333 DEL. CODE ANN. tit. 8, § 109(b).
334 Lawrence A. Hamermesh, Corporate Democracy and Stockholder-Adopted By-Laws: Taking Back the Street?, 73
TUL. L. REV. 409, 428–30 (1998).
335 See id. at 436 (assuming that a bylaw requiring a corporation to buy a certain brand of pencil would be invalid).
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At the same time, Section 141(a) explicitly contemplates limits on board authority, providing for
board management “except as may be otherwise provided in this chapter,” with “this chapter”
presumably including Section 109(b).336 Highlighting these wrinkles, one scholar has argued that
Sections 109(b) and 141(a) create a “recursive loop,” raising questions regarding the balance of
power between boards and shareholders that statutory formalism cannot answer.337
There is limited state law precedent addressing the scope of shareholders’ power to restrict board
authority in bylaws.338 The leading Delaware decision addressing this issue is CA, Inc. v.
AFSCME Employees Pension Plan.339 In that case, the SEC certified to the Delaware Supreme
Court questions regarding the propriety of a proposed bylaw that would have required a
corporation to reimburse the reasonable expenses incurred by dissident shareholders who
obtained at least one board seat in a proxy contest.340 Specifically, the SEC asked the
Delaware Supreme Court (1) whether the proposed bylaw was a proper subject for shareholder
action under Delaware law, and (2) whether the proposed bylaw would cause the company to
violate Delaware law, which would trigger a separate exclusion under Rule 14a-8(i)(2).341
At the outset of its analysis in CA, the Delaware Supreme Court explained that, in light of
Section 141(a) of the DGCL, shareholders’ bylaw-amendment power is not coextensive with the
board’s concurrent power and is “limited by the board’s management prerogatives.”342 In
identifying the relevant limits, the Court drew a distinction between shareholder-adopted bylaws
that prescribe substantive business decisions (which are invalid) and shareholder-adopted bylaws
that “define the process and procedures by which those decisions are made” (which may be
valid).343
The Court then applied that distinction to conclude that the proposed bylaw at issue in CA was a
proper subject for shareholder action because it had “both the intent and effect of regulating the
process for electing directors,” even though it was “infelicitously couched as a
substantive-sounding mandate to expend corporate funds.”344 The Court emphasized that a
bylaw’s status as procedural or substantive “must necessarily be determined in light of its context
and purpose.”345 The expense-reimbursement bylaw was procedural, the Court concluded,
because it involved director elections (a subject in which shareholders have “a legitimate and
protected interest”) and its purpose was to “promote the integrity of that electoral process by
facilitating the nomination of director candidates by stockholders.”346
(The Delaware Supreme Court went on to hold that the proposed bylaw would have caused the
company to violate Delaware law because it would have required the board to pay an insurgent’s
expenses even in cases where directors’ fiduciary duties precluded reimbursement—for example,
where a proxy contest was motivated by “personal or petty concerns” or waged to promote
336 DEL. CODE ANN. tit. 8, § 141(a).
337 Jeffrey N. Gordon, “Just Say Never?” Poison Pills, Deadhand Pills, and Shareholder-Adopted Bylaws: An Essay
for Warren Buffett, 19 CARDOZO L. REV. 511, 546–47 (1997).
338 Haseley & Ising, supra note 65 § 12.04[C].
339 953 A.2d 227 (Del. 2008).
340 Id. at 230.
341 Id. at 231.
342 Id. at 232.
343 Id. at 235–37.
344 Id. at 236.
345 Id. at 236–37.
346 Id. at 237.
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interests adverse to those of the corporation.347 After the CA decision, Delaware amended the
DGCL to authorize bylaws providing for the reimbursement of expenses incurred by shareholders
in soliciting proxies for director elections.348)
One issue that remains unresolved in Delaware and some other states is the extent to which
shareholder-adopted bylaws can restrict board authority to adopt or maintain a poison pill.349
Some companies have attempted to exclude such proposals on the grounds that they are improper
under state law (Rule 14a-8(i)(1)) and that they would cause the companies to violate state law if
implemented (Rule 14a-8(i)(2)).350
The Oklahoma Supreme Court confronted these issues in its 1999 decision in International
Brotherhood of Teamsters General Fund v. Fleming Companies, Inc., which involved a
shareholder-enacted bylaw requiring a company to redeem a poison pill and obtain shareholder
approval before adopting any new poison pill.351 The company challenged the legality of the
bylaw, arguing that it conflicted with a provision in Oklahoma’s corporation statute permitting
corporations to issue options.352 The Oklahoma Supreme Court rejected this argument, upholding
the bylaw after determining that nothing in Oklahoma’s corporation statute indicated that the
board’s power to issue options was “exempt” from shareholder-adopted bylaws.353
Fleming appears to endorse a more expansive view of shareholder power than the
Delaware Supreme Court’s decision in CA.354 The Oklahoma Supreme Court did not address
Oklahoma’s analog to Section 141(a) of the DGCL—an omission that may limit the decision’s
influence as persuasive authority in other states.355 A bylaw requiring the redemption of an
existing poison pill appears to prescribe a substantive business decision, and Delaware courts may
deem such a bylaw invalid for that reason.356 In contrast, a bylaw requiring shareholder approval
of future poison pills may qualify as procedural and thus valid.357 That conclusion, however, is
necessarily speculative. Some types of shareholder-approval requirements—for example, those
involving product offerings—may impermissibly infringe on board prerogatives under the CA
analysis.358 Whether a bylaw subjecting poison pills to a binding shareholder vote would fall
347 Id. at 240.
348 DEL. CODE ANN. tit. 8, § 113.
349 GUMBS & BROWN, supra note 262, at A-36.
350 Id.
351 975 P.2d 907, 909 & n.3 (Okla. 1999). Earlier in the litigation, a federal district court had ordered the company to
include the proposed bylaw amendment in its proxy materials. Int’l Bhd. of Teamsters Gen. Fund v. Fleming Cos., Inc.,
1997 WL 996768 (W.D. Okla. Feb. 19, 1997). On appeal, the U.S. Court of Appeals for the Tenth Circuit certified the
question of the proposed amendment’s permissibility to the Oklahoma Supreme Court. Int’l Bhd. of Teamsters Gen.
Fund v. Fleming Cos., Inc., 975 P.2d 907, 910 (Okla. 1999). Before the Oklahoma Supreme Court issued its decision,
the proposed amendment passed with approximately 60% of votes in its favor. Id.
352 Fleming Cos., Inc., 975 P.2d at 911.
353 Id. at 912.
354 FRANKLIN GEVURTZ, CORPORATION LAW 200–01 (3d ed. 2021).
355 McDonnell, supra note 311, at 228.
356 John C. Coffee, Jr., The Bylaw Battlefield: Can Institutions Change the Outcome of Corporate Control Contests?,
51 U. MIAMI L. REV. 605, 615 (1997).
357 Id.
358 See Hamermesh, supra note 334, at 444 (arguing, before the CA decision, that bylaws requiring shareholder votes on
certain issues would likely be invalid notwithstanding their “procedural” character).
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within that category remains uncertain. CA leaves this question and a variety of others regarding
shareholders’ bylaw-amendment power unanswered.359
SEC staff’s approach to bylaw proposals that implicate unsettled issues of state law has evolved
over time. In the late 1990s, several no-action letters involving such proposals indicated that SEC
staff was “unable to concur” in the company’s view that a proposal was excludable, but did not
express explicit disagreement with that view—a departure from staff’s standard denial
language.360 Some commentators criticized this development, contending that it gave companies
greater leeway to exclude bylaw proposals.361 In the early 2000s, SEC staff abandoned this
“agnostic” approach and adopted its current posture toward no-action requests implicating
unsettled issues of state law.362 Today, SEC staff generally denies such requests and concludes
that, without controlling state law, the company seeking no-action relief has not carried its burden
of demonstrating excludability under Rule 14a-8(g).363
Violations of Law
Rule 14a-8(i)(2) permits a company to exclude a proposal that would, if implemented, cause the
company to violate any state, federal, or foreign law to which it is subject.364 While this exclusion
overlaps with Rule 14a-8(i)(1)’s “improper subject” exclusion, it provides a distinct basis upon
which companies may omit a proposal from their proxy materials.365 The “improper subject”
exclusion applies to proposals involving subjects that are facially improper for shareholder
action.366 Rule 14a-8(i)(2), in contrast, permits the exclusion of proposals that would cause a
company to violate state law if implemented, even if the subject matter of the proposal is proper
on its face.367
As mentioned, companies sometimes seek to exclude bylaw proposals under both
Rule 14a-8(i)(1) and Rule 14a-8(i)(2). Under Rule 14a-8(i)(2), SEC staff has allowed companies
to exclude bylaw proposals that would conflict with provisions in their charters.368 Corporations
have also successfully invoked Rule 14a-8(i)(2) to exclude proposals that would, if implemented,
cause them to breach existing contracts, including employment agreements with executives.369
359 See Ben Walther, Bylaw Governance, 20 FORDHAM J. CORP. & FIN. L. 399, 400 (2015) (indicating that the scope of
shareholders’ bylaw power remains “ill-defined” under Delaware law).
360 GUMBS & BROWN, supra note 262, at A-37. During this period, other no-action responses involving bylaw proposals
that implicated unsettled state law issues expressed no view as to whether the proposals were excludable. Id.
361 Id.; ROBERT J. HAFT ET AL., ANALYSIS OF KEY SEC NO-ACTION LETTERS AND COMPLIANCE AND DISCLOSURE
INTERPRETATIONS § 10:19 (2025) (characterizing this approach as placing the risk of legal uncertainty on proponents of
shareholder proposals).
362
Haseley & Ising, supra note 65 § 12.04[D].
363 Id. In 2002, for example, SEC staff concluded that a company could not exclude a poison pill bylaw proposal as
improper under California law, reasoning that the company had not carried its burden of establishing excludability. Sw.
Gas Corp., SEC No-Action Letter, 2002 WL 597378 (Mar. 19, 2002).
364 17 C.F.R. § 240.14a-8(i)(2).
365 GUMBS & BROWN, supra note 262, at A-33.
366 Id.
367 Id.
368 E.g., Advanced Photonix, Inc., SEC No-Action Letter, 2014 WL 1411041 (May 15, 2014).
369 E.g., BankAmerica Corp., SEC No-Action Letter, 1999 WL 107732 (Feb. 24, 1999).
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Violations of the Proxy Rules
Rule 14a-8(i)(3) allows a company to exclude a proposal if the proposal or its supporting
statement is contrary to any of the SEC’s proxy rules, including Rule 14a-9, which prohibits
materially false or misleading statements in proxy solicitation materials.370 In Staff Legal Bulletin
(SLB) 14B, SEC staff identified the following circumstances in which Rule 14a-8(i)(3) may offer
a basis for excluding a proposal:
•
a proposal’s supporting statement impugns character, integrity, or personal reputation, or
directly or indirectly makes charges concerning improper, illegal, or immoral conduct or
association, without factual foundation;
•
the company demonstrates objectively that a factual statement is materially false or
misleading;
•
a proposal is so inherently vague or indefinite that neither shareholders nor the company
would be able to determine with any reasonable certainty what actions or measures the
proposal requires; or
•
substantial portions of a proposal’s supporting statement are irrelevant to a consideration
of the proposal’s subject matter, such that there is a strong likelihood that a reasonable
shareholder would be uncertain as to the matter on which she is being asked to vote.371
In contrast, SLB 14B explained that companies may not rely upon Rule 14a-8(i)(3) to exclude a
proposal on the basis that
•
the company objects to factual assertions because they are not supported;
•
the company objects to factual assertions that, while not materially false or misleading,
may be disputed or countered;
•
the company objects to factual assertions because those assertions may be interpreted by
shareholders in a manner that is unfavorable to the company, its directors, or its officers;
or
•
the company objects to statements because they represent the opinion of the shareholder
proponent or a referenced source, but the statements are not identified specifically as
such.372
Personal Grievances and Special Interests
Rule 14a-8(i)(4) allows a company to exclude a proposal if the proposal relates to the redress of a
personal claim or grievance against the company or any other person or is designed to result in a
benefit to the proponent, or to further a personal interest, which is not shared by the other
shareholders at large.373 Rule 14a-8(i)(4) has been successfully invoked to exclude proposals that
on their face involve personal grievances, many of which have been submitted by disgruntled
former employees.374 SEC staff has also permitted companies to rely on Rule 14a-8(i)(4) to
370 17 C.F.R. § 240.14a-8(i)(3).
371 SEC Staff Legal Bulletin No. 14B (Sept. 15, 2004), https://www.sec.gov/rules-regulations/staff-guidance/staff-legal-
bulletins/shareholder-proposals-staff-legal-bulletin-no-14b-cf https://perma.cc/N5JH-BDU8.
372 Id.
373 17 C.F.R. § 240.14a-8(i)(4).
374 E.g., Morgan Stanley, SEC No-Action Letter, 2004 WL 111573 (Jan. 14, 2004).
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exclude proposals based on evidence linking a proposal to a personal grievance, even where that
grievance is not apparent from the four corners of the proposal. For example, SEC staff has
allowed a company to exclude a proposal requesting the creation of an ethics committee chaired
by an outside director where the proponent was a former employee who had sued the company
and been involved in various disputes with it.375
Relevance
Rule 14a-8(i)(5) permits a company to exclude a proposal if the proposal relates to operations
which account for less than 5% of the company’s total assets at the end of its most recent fiscal
year, and for less than 5% of the company’s net earnings and gross sales for its most recent fiscal
year, provided the proposal is not “otherwise significantly related to the company’s business.”376
This “relevance” exclusion traces its roots to 1952, when the SEC amended the shareholder
proposal rule to allow the exclusion of proposals submitted “primarily for the purpose of
promoting general economic, political, racial, religious, social or similar causes.”377 In 1972, the
SEC replaced that subjective inquiry, amending the exclusion to cover proposals consisting of
a recommendation, request, or mandate that action be taken with respect to any matter,
including a general economic, political, racial, religious, social, or similar cause, that is not
significantly related to the business of the issuer or is not within the control of the issuer.378
In 1976, the agency removed the language concerning “general economic, political, racial,
religious, social or similar causes,” deeming it “superfluous.”379 In adopting this change, the SEC
rejected suggestions to expand the relevance exclusion to allow companies to omit any proposal
that lacked a “significant economic relation to the issuer’s business.”380 Instead, the SEC
explained that the relevance exclusion was not “hinged solely on the economic relativity of a
proposal,” and that proposals involving governance and ethical issues may be significant to a
company’s business “even though such significance is not apparent from an economic
viewpoint.”381 1983 amendments to Rule 14a-8 gave the relevance exclusion its current form,
adding the 5% numerical thresholds but preserving the permissibility of proposals that are
“otherwise significantly related” to a company’s business.382
For much of the shareholder proposal rule’s history, SEC staff adopted a narrow interpretation of
Rule 14a-8(i)(5), concluding that many matters that are not economically significant to a
company may nevertheless qualify as “otherwise significantly related” to its business.383 In a
1982 release, the SEC explained that staff had generally denied no-action relief under the
relevance exclusion “where a proposal has reflected social or ethical issues, rather than economic
375 Cabot Corp., SEC No-Action Letter, 1985 WL 54461 (Oct. 30, 1985).
376 17 C.F.R. § 240.14a-8(i)(5).
377 1952 Amendments, supra note 73, at *8.
378 1972 Amendments, supra note 101, at *4.
379 1976 Amendments, supra note 61, at *9.
380 Id. (emphasis added).
381 Id.
382 1983 Amendments, supra note 120, at *11. In 1997, the SEC proposed an amendment to the relevance exclusion
that would have adopted a purely economic standard for relevance by eliminating the “otherwise significantly related”
language. 1997 Proposed Amendments, supra note 140, at *9. The SEC ultimately decided not to adopt that change.
1998 Amendments, supra note 142, at *12.
383 Haseley & Ising, supra note 65 § 12.09[B].
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concerns, raised by the issuer’s business, and the issuer conducts any such business, no matter
how small.”384
This approach continued after the SEC adopted the relevance exclusion’s 5% numerical
thresholds, partially as a result of Lovenheim v. Iroquois Brands, Ltd., a 1985 decision from the
U.S. District Court for the District of Columbia.385 In Lovenheim, a shareholder sought an
injunction requiring a company to include in its proxy materials a proposal that the board
study the methods by which its French supplier produces paté de foie gras, and
report to the shareholders its findings and opinions, based on expert consultation, on
whether this production method causes undue distress, pain or suffering to the
animals involved and, if so, whether further distribution of this product should be
discontinued until a more humane production method is developed.386
The company attempted to exclude the proposal under Rule 14a-8(i)(5) on the ground that paté de
foie gras accounted for none of its earnings and less than .05% of its assets.387 The court sided
with the shareholder, relying on past SEC practice to conclude that the relevance exclusion does
not apply to proposals that have “ethical and social significance,” provided such proposals also
have a meaningful relationship to a company’s business.388 Because the plaintiff’s proposal
involved issues of ethical and social significance and implicated “significant” levels of the
company’s sales, the court ordered the company to include the proposal in its proxy materials.389
The Lovenheim court’s observation that the paté de foie gras proposal implicated “significant”
levels of the company’s sales is somewhat confusing; paté de foie gras accounted for $79,000 of
the company’s $141 million of annual revenue.390 While the court cautioned in a footnote that the
proposal would have been excludable if the company did not import any paté de foie gras,391
Lovenheim suggests that even minimal participation in an activity may preclude reliance on the
relevance exclusion in cases where the activity raises issues of ethical and social concern.
Before 2017, SEC staff’s application of Rule 14a-8(i)(5) generally reflected this principle. In
1999, for example, SEC staff rejected a financial services company’s effort to exclude a proposal
advocating a policy against future purchases of tobacco stocks, even though tobacco stocks
constituted less than 1% of the company’s equity portfolio.392 Presumably, this decision was
based on the significance of tobacco sales as a social issue. In contrast, SEC staff has granted
no-action relief under Rule 14a-8(i)(5) in cases where a company does not engage in the activity
that is the subject of a proposal. For example, in 2003, SEC staff allowed a consumer goods
company to exclude a proposal recommending a policy against human embryonic stem cell
research based on the company’s representation that it does not perform such research.393
Since 2017, SEC staff’s approach to the relevance exclusion has shifted back and forth with
changes in presidential administration and SEC leadership. In 2017, the SEC’s Division of
384 1982 Proposed Amendments, supra note 113, at *16.
385 618 F. Supp. 554 (D.D.C. 1985); see also GUMBS & BROWN, supra note 262, at A-56 (explaining that Lovenheim
“had a lasting impact on no-action positions under Rule 14a-8(i)(5)”).
386 Lovenheim, 618 F. Supp. at 556.
387 Id. at 559.
388 Id. at 561 & n.16.
389 Id. at 561.
390 Id. at 558.
391 Id. at 561 n.16.
392 Lincoln Nat’l Corp., SEC No-Action Letter, 1999 WL 160353 (Mar. 24, 1999).
393 Procter & Gamble Co., SEC No-Action Letter, 2003 WL 21919560 (Aug. 11, 2003).
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Corporation Finance issued SLB 14I, which announced a broader view of the relevance exclusion
than SEC staff had historically applied.394 SLB 14I observed that SEC staff had generally denied
no-action relief under the relevance exclusion where a company conducted any business, no
matter how small, related to an ethical or social issue raised by a proposal, even after the adoption
of numerical tests for economic relevance in 1983.395 That approach, SLB 14I said, had “unduly
limited the [relevance] exclusion’s availability.”396 Going forward, SLB 14I explained, SEC staff
would adopt a more discerning approach when analyzing the relevance of social and ethical
issues to a company’s business.397 Under this framework, where a proposal’s significance to a
company’s business is not apparent on its face, the proposal “may be excludable” unless the
proponent demonstrates its significance—for example, with evidence that the proposal “may have
a significant impact on ... segments of the issuer’s business or subject the issuer to significant
contingent liabilities.”398 The “mere possibility of reputational or economic harm,” however,
would not preclude no-action relief.399
SEC staff’s posture toward Rule 14a-8(i)(5) shifted yet again with a change in the SEC’s
composition after the 2020 presidential election. In 2021, SLB 14L rescinded SLB 14I and
announced a return to SEC staff’s “longstanding approach” of analyzing the relevance exclusion
“in a manner ... consistent with Lovenheim v. Iroquois Brands, Ltd.”400
After another change in SEC leadership, the pendulum swung back toward a broader view of the
relevance exclusion. In 2025, SLB 14M rescinded SLB 14L and reinstated several of the key
principles from SLB 14I.401
Absence of Power/Authority
Rule 14a-8(i)(6) allows companies to exclude proposals that they lack the power or authority to
implement.402 SEC staff have granted no-action relief under this exclusion where proposals would
have required a company to violate the law or breach existing contracts.403 Other successful
no-action requests under Rule 14a-8(i)(6) have involved proposals requesting action by separate
legal entities that were not under the control of the company to which the proposals were
submitted.404
Proposals calling for director independence requirements sometimes implicate Rule 14a-8(i)(6).
Companies have sought to exclude some proposals advocating such requirements as beyond their
power to implement based on two considerations. First, while a company’s board nominates a
394 SEC Staff Legal Bulletin No. 14I (Nov. 1, 2017), https://www.sec.gov/rules-regulations/staff-guidance/staff-legal-
bulletins/shareholder-proposals-staff-legal-bulletin-no-14i-cf https://perma.cc/RY5F-H8S5.
395 Id.
396 Id.
397 Id. In contrast, SLB 14I indicated that SEC staff would generally view “substantive governance matters” as being
“significantly related” to almost all companies. Id.
398 Id. (internal quotation marks omitted).
399 Id.
400 SEC Staff Legal Bulletin No. 14L (Nov. 3, 2021) [hereinafter SLB 14L], https://www.sec.gov/rules-regulations/
staff-guidance/staff-legal-bulletins/shareholder-proposals-staff-legal-bulletin-no-14l-cf https://perma.cc/G6H2-C8X5.
401 SEC Staff Legal Bulletin No. 14M (Feb. 12, 2025) [hereinafter SLB 14M], https://www.sec.gov/about/shareholderproposals-staff-legal-bulletin-no-14m-cf https://perma.cc/FUN9-G873.
402 17 C.F.R. § 240.14a-8(i)(6).
403 BRENT A. OLSON, PUBLICLY TRADED CORPORATIONS HANDBOOK § 10:17 (2025); Donovan Gibbons, Excluding
Proposals in the Absence of Corporate Authority, 94 DENV. L. REV. ONLINE 384, 389–90 (2017).
404 GUMBS & BROWN, supra note 262, at A-61.
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slate of director candidates each year, directors are ultimately elected by shareholders.405 Second,
directors may lose their independence as a result of changed circumstances outside of a board’s
control.406
SEC staff addressed these issues in SLB 14C, which explains that its analysis of director
independence proposals under Rule 14a-8(i)(6) focuses primarily on whether a proposal “requires
continued independence at all times.”407 Under SLB 14C, proposals that would require directors
to maintain their independence at all times are excludable as beyond a company’s power to
implement.408 In contrast, proposals that permit companies to cure a director’s loss of
independence are not automatically excludable under Rule 14a-8(i)(6).409 SLB 14C indicates that
this approach is consistent with independence requirements in SEC regulations, which provide
companies with an opportunity to cure a loss of independence.410
For companies incorporated in states where boards must obtain shareholder approval for charter
amendments, Rule 14a-8(i)(6) allows the exclusion of proposals requesting or recommending that
companies amend their charters in specified ways.411 Such proposals are also generally
excludable under Rule 14a-8(i)(1) (the “improper subject” exclusion) and Rule 14a-8(i)(2) (the
“violations of law” exclusion).412 In SLB 14D, however, the Division of Corporation Finance
explained that proponents can avoid all three of these exclusions by requesting that the board
“take the steps necessary” to amend a company’s charter in particular ways.413 SEC staff usually
allows proponents to redraft improper charter-amendment proposals along these lines.414
Ordinary Business
Rule 14a-8(i)(7) allows the exclusion of proposals that deal with a matter “relating to the
company’s ordinary business operations.”415 The ordinary business exclusion (OBE) is grounded
in “the policy of most state corporate laws,” which “confine the resolution of ordinary business
problems to management and the board of directors since it is impracticable for shareholders to
decide how to solve such problems.”416
The OBE has generated the most controversy of Rule 14a-8’s substantive exclusions, playing a
central role in disputes regarding E&S proposals.417 In recent years, the OBE has also often been
the substantive basis for exclusion that companies most frequently assert and that SEC staff most
frequently rely upon to grant no-action relief.418
405 DEL. CODE ANN. tit. 8, § 211(b); MODEL BUS. CORP. ACT § 8.03(c).
406 See SEC Staff Legal Bulletin No. 14C (June 28, 2005), https://www.sec.gov/rules-regulations/staff-guidance/staff-
legal-bulletins/shareholder-proposals-staff-legal-bulletin-no-14c-cf https://perma.cc/3XLE-DQ34.
407 Id.
408 Id.
409 Id.
410 Id.
411 SLB 14D, supra note 322.
412 Id.
413 Id.
414 Id.
415 17 C.F.R. § 240.14a-8(i)(7).
416 1997 Proposed Amendments, supra note 140, at *13.
417 Haseley & Ising, supra note 65 § 12.06.
418 Marc S. Gerber & Jeongu Gim, Shareholder Proposal No-Action Requests in the 2025 Proxy Season: A Continuing
(continued...)
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Originally adopted in 1954,419 the OBE became the focal point for disputes regarding social
policy proposals in the 1970s.420 In 1976, the SEC issued guidance on the OBE in response to
concerns that the exclusion was being used to omit proposals that were important to
shareholders.421 In that guidance, the SEC took the position that proposals involving issues with
“significant policy, economic or other implications” cannot be omitted under the OBE.422 As an
illustration, the SEC explained that a proposal recommending that a company not construct a
nuclear power plant would not be excludable under the OBE in light of the important economic
and safety considerations surrounding nuclear power plants.423 In the 1976 guidance, the SEC
indicated that a company may omit a proposal under the OBE only if the proposal (1) involves
“mundane” business matters, and (2) does not involve “any substantial policy or other
considerations.”424
The SEC has further explained that the policy underlying the OBE rests on “two central
considerations.”425
First, the OBE is based on the premise that certain tasks are “so fundamental to management’s
ability to run a company on a day-to-day basis that they could not, as a practical matter, be
subject to direct shareholder oversight.”426 As examples, the SEC has cited “management of the
workforce, such as the hiring, promotion, and termination of employees, decisions on production
quality and quantity, and the retention of suppliers.”427 Proposals related to such matters are
excludable under the OBE unless they involve “sufficiently significant social policy issues” that
“transcend ... day-to-day business matters.”428
Second, the OBE permits the omission of proposals that seek to “micromanage” a company, even
if those proposals implicate significant policy questions.429 Proposals involving “intricate detail”
or that seek to impose “specific time-frames or methods for implementing complex policies” may
run afoul of this rule.430 The prohibition of micromanagement appears to be based in part on the
D.C. Circuit’s 1992 decision in Roosevelt v. E.I. Du Pont de Nemours & Co., which held that the
OBE permitted a company to exclude a proposal requesting that it accelerate by one year a plan
to phase out its production of chlorofluorocarbons (CFCs).431 While the D.C. Circuit seemed to
accept that the production of CFCs was a significant policy issue, it sided with the company
Surge in Requests and a Favorable Regulatory Environment, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
(Sept. 25, 2025), https://www.skadden.com/insights/publications/2025/09/insights-september-2025/corporate/
shareholder-proposal-noaction-requests-in-the-2025-proxy-season https://perma.cc/986S-7QKD.
419 1954 Amendments, supra note 74, at *4.
420 ARANOW & EINHORN, supra note 259 § 16.04[G].
421 1976 Amendments, supra note 61, at *11.
422 Id.
423 Id.
424
Id. at *12.
425 1998 Amendments, supra note 142, at *4.
426 Id.
427 Id. The SEC has taken the position that proposals requesting the preparation of a report or the formation of a board
committee are to be analyzed based on whether the subject matter of the report or committee involves a matter relating
to ordinary business operations. 1983 Amendments, supra note 120, at *7.
428 1998 Amendments, supra note 142, at *4.
429 Id. at *5.
430 Id.
431 958 F.2d 416, 425–28 (D.C. Cir. 1992).
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because the proposal involved a minor difference in the timing of an existing management
plan.432
There is no bright-line rule for determining whether an issue qualifies for the “significant policy”
exception to the OBE. In analyzing that exception, SEC staff have appeared to give weight to
media coverage, public debate, and legislative and regulatory activity regarding a subject
matter.433 Over the years, SEC staff has changed its position on the “significant policy”
exception’s application to a range of topics, including plant closings, the sale of tobacco products,
executive compensation, golden parachutes, and net neutrality.434 Some have attributed these
types of changes to the subjectivity involved in determining whether a proposal implicates
significant policy issues,435 while the SEC has emphasized the need to account for changed
circumstances.436
One of the SEC’s highest-profile reversals involving the shareholder proposal rule emerged from
an effort to inject greater certainty into the OBE’s application. As discussed, in 1992, SEC staff
announced a categorical rule allowing the exclusion of all proposals concerning a company’s
employment policies and practices for the general workforce, even if such proposals implicated
significant social issues.437 SEC staff adopted this position in granting a no-action request from
Cracker Barrel Old Country Store, which sought to exclude a proposal requesting that the
company implement a non-discrimination policy concerning sexual orientation.438 In granting the
no-action request based on the OBE and announcing a new categorical rule, SEC staff contended
that “the line between includable and excludable employment-related proposals based on social
policy considerations has become increasingly difficult to draw.”439 After the Cracker Barrel
no-action letter received significant criticism,440 the SEC reversed course in 1998 and returned to
a case-by-case approach of evaluating whether employment-related proposals qualify for the
OBE’s “significant policy” exception.441
Trinity Wall Street v. Wal-Mart Stores, Inc., 792 F.3d 323 (3d Cir. 2015)
In 2015, the U.S. Court of Appeals for the Third Circuit grappled with the OBE in Trinity Wall Street v. Wal-Mart
Stores, Inc., 792 F.3d 323 (3d Cir. 2015). In that case, Wal-Mart sought to exclude a proposal requesting that its
board amend the charter of its governance committee to require oversight of whether Wal-Mart should sell
products that endanger public safety, im
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