# The Shareholder Proposal Rule > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR48855 ## Record - **Collection:** Congressional research report - **Document type:** Reports - **Published:** February 11, 2026 - **Citation:** R48855 ## Text 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. Congressional Research Service The Shareholder Proposal Rule 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 Congressional Research Service The Shareholder Proposal Rule Congressional Research Service The Shareholder Proposal Rule 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. Congressional Research Service 1 The Shareholder Proposal Rule 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...) Congressional Research Service 2 The Shareholder Proposal Rule 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. Congressional Research Service 3 The Shareholder Proposal Rule 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). Congressional Research Service 4 The Shareholder Proposal Rule 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. Congressional Research Service 5 The Shareholder Proposal Rule 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.” Congressional Research Service 6 The Shareholder Proposal Rule 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. Congressional Research Service 7 The Shareholder Proposal Rule 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. Congressional Research Service 8 The Shareholder Proposal Rule 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]. Congressional Research Service 9 The Shareholder Proposal Rule 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. Congressional Research Service 10 The Shareholder Proposal Rule 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. Congressional Research Service 11 The Shareholder Proposal Rule 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. Congressional Research Service 12 The Shareholder Proposal Rule 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. Congressional Research Service 13 The Shareholder Proposal Rule 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. Congressional Research Service 14 The Shareholder Proposal Rule 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). Congressional Research Service 15 The Shareholder Proposal Rule 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). Congressional Research Service 16 The Shareholder Proposal Rule 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). Congressional Research Service 17 The Shareholder Proposal Rule 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). Congressional Research Service 18 The Shareholder Proposal Rule 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. Congressional Research Service 19 The Shareholder Proposal Rule 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). Congressional Research Service 20 The Shareholder Proposal Rule 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.” Congressional Research Service 21 The Shareholder Proposal Rule 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...) Congressional Research Service 22 The Shareholder Proposal Rule 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. Congressional Research Service 23 The Shareholder Proposal Rule 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. Congressional Research Service 24 The Shareholder Proposal Rule 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. Congressional Research Service 25 The Shareholder Proposal Rule 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. Congressional Research Service 26 The Shareholder Proposal Rule 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). Congressional Research Service 27 The Shareholder Proposal Rule (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. Congressional Research Service 28 The Shareholder Proposal Rule 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). Congressional Research Service 29 The Shareholder Proposal Rule 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 electi [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR48855. Public record. Not legal advice.