Rescission of Rule 14a-8's Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4

Federal RegisterSep 21, 2026

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SECURITIES AND EXCHANGE COMMISSION

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

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

RIN 3235-AN47

Rescission of Rule 14a-8's Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4

AGENCY:

Securities and Exchange Commission.

ACTION:

Proposed rule.

SUMMARY:

The Securities and Exchange Commission (“Commission”) is proposing to rescind Rule 14a-8 under the Securities Exchange Act of 1934 (“Exchange Act”) and leave determinations about the role of shareholder proposals to State law and company governing documents. The Commission also is proposing to amend Rule 14a-4 under the Exchange Act to expand the circumstances under which a company may exercise, with respect to proxies it receives, discretionary voting authority on proposals that will be presented at a shareholder meeting but not included in the company's proxy materials. At the same time, the proposed amendments to Rule 14a-4 would provide shareholders with the means to elect to prevent the company from exercising such authority with respect to their individual shares.

DATES:

This release was published in the

Federal Register

on September 21, 2026. Comments should be received on or before November 20, 2026.

ADDRESSES:

Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's internet comment form (

https://www.sec.gov/comments/s7-2026-32/rescission-rule-14a-8s-federal-regulation-shareholder-proposals-amendments-rule-14a-4

• Send an email to

rule-comments@sec.gov.

Please include File Number S7-2026-32 on the subject line.

Paper Comments

• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-2026-32. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method of submission. The Commission will post all submitted comments on the Commission's website (

https://www.sec.gov/rules-regulations/public-comments/s7-2026-32

). Do not include personally identifiable information in submissions; you should submit only information that you wish to make available publicly. The Commission may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission's website. To ensure direct electronic receipt of such notifications, sign up through the “Stay Connected” option at

www.sec.gov

to receive notifications by email. A summary of the proposal of not more than 100 words is posted on the Commission's website (

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

FOR FURTHER INFORMATION CONTACT:

Jenny J. Choi, Special Counsel, or Matt McNair, Senior Adviser to the Chief Counsel, Office of Chief Counsel, at (202) 551-3500, David M. Plattner, Special Counsel, or Blake M. Grady, Special Counsel, Office of Mergers and Acquisitions, at (202) 551-3440, Division of Corporation Finance, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

The Commission is proposing to rescind 17 CFR 240.14a-8 (“Rule 14a-8”) and amend the following rules and forms:

EP21SE26.072

Table of Contents

I. Introduction

17 CFR 229.10 through 229.1610.

17 CFR 229.10 through 232.501.

15 U.S.C. 78a

et seq.

II. Discussion of Proposed Amendments

A. Proposed Rescission of Rule 14a-8

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

2. Policy Reasons for Rescinding Rule 14a-8

3. Investment Company Considerations

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

1. Overview of Current Rules Related to Discretionary Voting Authority

2. Historical Background

3. Proposed Rule Amendments

C. Other Proposed Amendments

D. General Request for Comment

III. Other Matters

IV. Economic Analysis

A. Introduction

B. Baseline

1. Current Regulatory Framework

2. Affected Parties

3. Current Practices

C. Benefits and Costs

1. Proposed Rescission of Rule 14a-8

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

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

4. Aggregate Monetized Benefits and Costs

D. Effects on Efficiency, Competition, and Capital Formation

1. Efficiency

2. Competition

3. Capital Formation

E. Reasonable Alternatives

1. Alternative to Rescinding Rule 14a-8

2. Switch the Default Choice of Check Box in Proposed Rule 14a-4(c)(2) Amendment

3. Require a Separate Check Box for Each Proposal

F. Request for Comment

V. Paperwork Reduction Act

A. Summary of the Collection of Information

B. Estimated Paperwork Burden Effects of the Proposed Amendments

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

D. Request for Comment

VI. Congressional Review Act

VII. Initial Regulatory Flexibility Act Analysis

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

B. Legal Basis

C. Small Entities Subject to the Proposed Amendments

D. Projected Reporting, Recordkeeping, and Other Compliance Requirements

E. Duplicative, Overlapping, or Conflicting Federal Rules

F. Significant Alternatives

G. Request for Comment

Statutory Authority

I. Introduction

“Corporations are creatures of state law.”

Because “regulation of corporate governance is regulation of entities whose very existence and attributes are a product of state law,” “[n]o principle of corporation law and practice is more firmly established than a State's authority to regulate domestic corporations, including the authority to define the voting rights of shareholders.”

Shareholder voting rights are generally exercised at shareholder meetings, where proposals are put before the shareholders for a vote.

The conduct of shareholder meetings, including how proposals are presented, is governed by State law.

Cort

Ash

, 422 U.S. 66, 84 (1975). Foreign issuers, as that term is defined in 17 CFR 240.3b-4(b), are not creatures of State law. Accordingly, to the extent this release refers to State law, the corresponding reference for foreign issuers would be to the applicable foreign law. Foreign private issuers, as defined in 17 CFR 240.3b-4, are exempt from the Commission's proxy requirements with respect to solicitations of their own security holders, 17 CFR 240.3a12-3(b); Regulation 14A (17 CFR 240.14a-1 through 240.14b-2). Foreign private issuers also are not subject to information statement requirements.

See

Regulation 14C (17 CFR 240.14c-1 through 240.14c-101).

CTS Corp

Dynamics Corp. of Am.,

481 U.S. 69, 89 (1987);

see also

H.R. Rep. No. 1383 at 13-14, 73 Cong., 2d Sess. (1934) (“Insiders have at times solicited proxies without fairly informing the stockholders of the purposes for which the proxies are to be used and have used such proxies to take from the stockholders for their own selfish advantage valuable property rights.”).

15 U.S.C. 78n (“section 14”).

See

H.R. Rep. No. 1383 at 13-14, 73d Cong., 2d Sess. (1934) (“the proposed bill gives the Commission power to control the conditions under which proxies may be solicited with a view to preventing the recurrence of abuses which have frustrated the free exercise of the voting rights of stockholders.”).

15 U.S.C. 78n(a) (“section 14(a)”).

15 U.S.C. 78n(a)(1).

see also

PUHCA section 7(c)(1) (granting the Commission authority to prohibit the sale of common stock unless it has “at least equal voting rights with[ ] any outstanding security of the declarant”) and (e) (barring the exercise of voting rights if “the Commission finds that such exercise of such privilege or right will result in an unfair or inequitable distribution of voting power among holders of the securities of the declarant”) [15 U.S.C. 79g(c)(1), (e) (2004)];

supra

note 28.

But see supra

note 28.

Therefore, the Commission's authority under section 14(a) to regulate the proxy solicitation process does not permit the Commission to displace State law regarding shareholder voting rights.

By establishing standards not found in State law for when a shareholder proposal must be included in, or may be excluded from, a company's proxy materials, the Commission effectively dictates the scope of shareholder voting rights and, therefore, exceeds its authority.

Cf. Bus. Roundtable,

905 F.2d at 411 (stating that section 14(a) was not intended to authorize the Commission to “step beyond control of voting procedure and into the distribution of voting power”).

To the extent legislative history is considered, it only underscores the limitations on the Commission's authority that are inherent in the statutory text and structure. That history indicates that Congress's purpose in enacting this provision was to empower the Commission to facilitate “fair corporate suffrage” on the proxy by regulating the “conditions under which proxies may be solicited.”

It also suggests an intent to authorize regulations that would protect “free exercise of the voting rights” of shareholders,

require “adequate disclosure” of the matters to be decided at the shareholder meeting,

and prevent “irresponsible outsiders” and “unscrupulous corporate officials” from “concealing and distorting facts” in their proxy solicitations.

Courts have thus interpreted section 14(a) as bearing “almost exclusively on disclosure,” with a “central concern” that proxies not be obtained through “deceptive or inadequate disclosure in proxy solicitation.”

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

see also, e.g., Virginia Bankshares, Inc.

Sandberg,

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

H.R. Rep. No. 1383 at 14, 73d Cong., 2d Sess. (1934);

see also Bus. Roundtable,

905 F.2d at 408 (“[T]he Exchange Act cannot be understood to include regulation of an issue that is so far beyond matters of disclosure . . . and that is concededly a part of corporate governance traditionally left to the states.”). In section II.A.1.c below, we discuss how the structure and conditions of current Rule 14a-8, including its various eligibility criteria and bases for exclusion, can act to supplant State law voting rights.

Ala. Ass'n of Realtors

Dep't of Health & Hum. Servs.,

594 U.S. 758, 764 (2021) (“Our precedents require Congress to enact exceedingly clear language if it wishes to significantly alter the balance between federal and state power . . . .”) (quoting

U.S. Forest Serv.

Cowpasture River Pres. Ass'n,

590 U.S. 604, 621-622 (2020)).

905 F.2d at 408.

Id.

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

Manuel Cohen,

Federal Legislation Affecting the Public Offering of Securities,

28 Geo. Wash. L. Rev. 119, 124 n.18 (1959) (“For some years after the passage of Securities Act of 1933, bills were introduced in the Senate proposing federal incorporation. None of these were enacted.”); Joel Seligman,

The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance 205-10

(3d ed. Aspen Publ'rs 2003) (describing efforts by the Roosevelt administration to regulate corporate governance and its eventual abandonment); Symposium: Federal Chartering of Corporations: A Proposal, 61 Geo. L.J. 89, 89 n. 1 (1972) (collecting bills that would have established federal corporate chartering from the 1930s).

See, e.g.,

Exchange Act section 10A(m) (directing the Commission to adopt rules requiring national securities exchanges to prohibit the listing of any security of an issuer that does not meet certain specified requirements related to audit committee procedures and independence) [15 U.S.C. 78j-1(m)]; Exchange Act section 14A (requiring public companies, among other things, to conduct a separate shareholder advisory vote to approve the compensation of executives, as disclosed pursuant to Item 402 of Regulation S-K) [15 U.S.C. 78n-1].

Nor do the references to the “public interest” and “protection of investors” in section 14(a) provide a basis for the Commission to intrude into shareholder voting rights or corporate management. Courts have consistently recognized that “public interest” is not an open-ended delegation of power; rather, such language “must be limited to the purposes Congress had in mind when it enacted the legislation.”

Those statutory purposes are discerned from the text and context of the statute, which in turn cabin what is “necessary or appropriate” under the Commission's

rulemaking authority.

In the context of section 14(a), this means that rules adopted under this provision must focus on the statute's core concern with regulating the proxy solicitation process and the disclosures within the solicitations—not on defining or reshaping the substantive scope of shareholder voting rights. The phrase “protection of investors” likewise cannot reasonably be construed to authorize the Commission to engage in such intrusions into State law.

To read these terms otherwise would permit the Commission to use the Federal securities laws to supplement or override “firmly established” State law authority over shareholder rights—an approach that the Supreme Court has rejected absent explicit congressional authorization.

Bus. Roundtable,

905 F.2d at 413 (quoting

NAACP

Fed. Power Comm'n,

425 U.S. 662, 670 (1976));

see generally FCC

Consumers' Research,

606 U.S. 656, 690 (2025) (explaining that the Supreme Court has “long held that the words `public interest' in a regulatory statute do not encompass the general public welfare but rather take meaning from the purposes of the regulatory legislation”) (quotation marks and citation omitted).

See also Acceleration of Effectiveness of Registration Statements of Issuers with Certain Mandatory Arbitration Provisions,

Release No. 33-11389 (Sept. 17, 2025) [90 FR 45125 (Sept. 19, 2025)] (noting that courts have considered the scope of the public interest and investor protection standard in the context of the Federal securities laws and determined that, when applying this standard, it is only permissible to consider those matters over which the Commission has authority under the Federal securities laws).

See Davis

Mich. Dep't of Treasury,

489 U.S. 803, 809 (1989) (explaining that “statutory language cannot be construed in a vacuum,” but rather “the words of a statute must be read in their context and with a view to their place in the overall statutory scheme”).

See id.

See, e.g., CTS Corp.

Dynamics Corp. of Am.,

481 U.S. 69, 89 (1987).

b. Evolution of Rule 14a-8

The earliest versions of the Commission's proxy rules enacted under section 14(a) focused on disclosure and providing shareholders with the means to specify the action to be taken pursuant to their proxies.

In 1942, the Commission adopted Rule 14a-8's predecessor, Rule X-14A-7, which established a requirement that management include in the company's proxy materials a shareholder proposal that “is a proper subject for action by the security holders.”

Although the Commission did not define “proper subject” in the rule, it issued a release in 1945 that contained a letter from Division of Corporation Finance Director Baldwin B. Bane explaining that the term referred to “such matters . . . as are proper subjects for stockholders' action under the laws of the [S]tate under which [the company] is organized.”

Release No. 34-378 (Sept. 24, 1935) 1935 WL 29270 (requiring a “brief description” of the matters to be considered, together with the proposed action to be taken by the proxy holder, requiring the mailing of proxy materials to record owners at the requesting shareholder's expense, and prohibiting materially false or misleading statements under a general anti-fraud provision); Release No. 34-1823 (Aug. 11, 1938) [3 FR 1991 (Aug. 13, 1938)] (introducing the concept of the proxy statement that must be given to each person solicited, and requiring that each matter to be considered be subject to a separate yes or no vote).

RuleX-14A-7 provided in pertinent part: “In the event that a qualified security holder of the issuer has given the management reasonable notice that such security holder intends to present for action at a meeting of security holders of the issuer a proposal which is a proper subject for action by the security holders, the management shall set forth the proposal and provide means by which security holders can make a specification as provided in [the proxy rules].”17 CFR 240.14a-7 (1943). The 1942 rule also introduced the requirement that management, if it opposed the shareholder's proposal, include in its proxy materials the name and address of the proponent and a 100-word statement in support of the proposal, if requested by the proponent.

Id.

The maximum length of a proponent's supporting statement under Rule 14a-8 has been revised by the Commission on several occasions and is currently 500 words, inclusive of the proposal text.

See

1945 Release.

The letter responded to a company that sought exclusion of proposals relating to matters of a “general political, social or economic nature” and asked whether such proposals were a proper subject for shareholder action under Rule X-14A-7. Without referencing the laws of the State under which the company was organized, Director Bane stated that “[i]t is my conclusion that the proposals which have been presented to you are not `proper subjects for action' by your company's stockholders within the meaning of that phrase as used in Rule X-14A-7. Consequently, it will be unnecessary for you to include the proposals in the management's proxy statement if you do not wish to do so.”

Director Bane also stated that “[it] was not the intent of Rule X-14A-7 to permit stockholders to obtain the consensus of other stockholders with respect to matters which are of a general political, social or economic nature. Other forums exist for the presentation of such views.”

Whether intentionally or not, Director Bane's letter effectively positioned Rule X-14A-7 as a new Federal common law for shareholder voting rights, and the letter's informal understanding of whether a matter was “a proper subject for action” does not appear to have been based on the law of any particular State, let alone the State under which the company was organized.

Id.

In the years that followed, the Commission repeatedly amended what is now Rule 14a-8 in ways that progressively expanded the Commission's role in determining, interpreting, and effectively shaping matters traditionally governed by State law. As discussed above, the 1942 rule relied substantially on the concept of “proper subject for action” to determine which proposals must be included on the company's proxy. Due to a lack of relevant State laws to provide guidance on what was a “proper subject,” as questions arose about the content of shareholder proposals, proponent conduct, and management objections, the Commission increasingly inserted Federal criteria in place of State law standards.

See Medical Committee for Human Rights

SEC,

432 F.2d 659, 677 (D.C. Cir. 1970),

vacated,

404 U.S. 403 (1972) (noting that “the paucity of applicable state law giving content to the concept of `proper subject' led the Commission to seek guidance from precedent existing in jurisdictions which had a highly developed commercial and corporate law and to develop its own `common law' relating to proper subjects for shareholder action”);

see also Hearings on Problems in Enforcing the Securities Laws Before a Subcommittee of the Senate Committee on Banking and Currency,

85th Cong., 1st Sess. 117-118 (1957) (“In the absence of a State statute establishing that a proposal is a proper subject for stockholder action, the Commission will rely on the common law if this can be ascertained. It will also consider other sources such as the corporate law of other States, particularly of the leading commercial States, as well as the decisions of the Federal courts, textbooks, law journals, and other similar material where the question may be discussed.”).

Through a series of amendments adopted in 1947 and 1948, the Commission required issuers to provide an explanation to the Commission when asserting that shareholder proposals were improper or untimely

and introduced new bases for excluding such proposals.

These amendments provide an early example of how the proxy rules began to delineate the limits of shareholder voting rights independent of State law. In particular, adding new exclusionary bases that went beyond whether a proposal was a “proper subject for action” under State law opened the door for more grounds for exclusion to be added, sometimes on a seemingly ad hoc basis in response to emergent issues. As a result of these and subsequent amendments, it became possible—as remains the case today—for there to be circumstances under which a shareholder's proposal is a “proper subject for action” and thereby permissible under State law but eligible for exclusion from the proxy materials under Rule 14a-8.

See Adoption of Revised Proxy Rules,

Release No. 34-4037 (Dec. 16, 1947) [12 FR 8768 (Dec. 24, 1947)].

See Adoption of Amendments to Proxy Rules,

Release No. 34-4185 (Nov. 5, 1948) [13 FR 6678 (Nov. 12, 1948)] (“1948 Adopting Release”).

See

1948 Adopting Release. For example, the 1948 amendments added provisions permitting exclusion on the basis of, among other things, a personal grievance or resubmission of a proposal. Thus, a proposal that may have been a proper subject for shareholder action under State law but that (1) could be characterized as submitted “primarily for the purpose of enforcing a personal claim or of redressing a personal grievance against the issuer or its management” or (2) was substantially the same proposal as was submitted for a vote of shareholders at the previous annual meeting (or any subsequent special meeting) that received less than three percent of votes cast could be excluded from a company's proxy materials.

Id.

at 6679. These exclusions remain, as subsequently revised, in the current rule.

See

17 CFR 240.14a-8.

Later amendments, including the 1952 exclusion for proposals promoting “general economic, political, racial, religious, social or similar causes”

and the 1954 “ordinary business” exclusion,

further entangled Federal criteria with State law requirements. The application of these criteria often required judgments about matters of boards' authority and shareholders' role in corporate decision-making. The 1954 amendments also restructured Rule 14a-8 such that the “proper subject for action” criterion was no longer a threshold qualification for the inclusion of a shareholder proposal; instead, it was re-framed as a basis permitting an issuer to exclude a proposal if it was

not

a proper subject for action under State law.

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

See Amendment of Proxy Rules,

Release No. 34-4775 (Dec. 11, 1952) [17 FR 11431 (Dec. 18, 1952)]. In 1972, the Commission revised the existing “social policy” exclusion relating to “general economic, political, racial, religious, social or similar causes” to eliminate the formulation that focused on whether a proposal was submitted “primarily for the purpose of” promoting a particular cause.

Solicitations of Proxies,

Release No. 34-9784 (Sept. 22, 1972) [37 FR 23178 (Oct. 31, 1972)]. In its place, the Commission adopted a broadened standard that turned on the relationship between the issuer and the subject matter of the proposal.

Id.

at 23179 (permitting exclusion of a matter that is “not significantly related to the business of the issuer or is not within the control of the issuer”). As the adopting release explained, the amendment sought “to replace the subjective terms of the provision with objective standards to the extent feasible and thereby create greater certainty in the application of the rule.”

Id.

at 23178. The Commission also made a corresponding revision to the personal grievance exclusion, removing similar language so that the two exclusions no longer required inquiry into a proponent's motivations.

See id.

at 23179.

See

1954 Adopting Release.

See id.

Through this amended language, the 1954 amendments included in Rule 14a-8 for the first time an express reference to State law, which was previously referenced only in the 1945 Release.

See id.

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

In doing so, the Commission made inclusion of shareholder proposals in the company's proxy materials dependent on, among other things, whether proposals relate significantly to an issuer's business or implicate areas of board and management discretion.

Some of these exclusions were based on the Commission's interpretation of State law allocations of authority between shareholders and management, and the rest lacked any connection to State law.

The Commission also added a note to Rule 14a-8(i)(1) explaining that the propriety of a shareholder proposal under State law may depend on whether the proposal is precatory or mandatory, signaling broader Federal takeover in the purported application of State law concepts.

The note, as discussed further in section II.A.1.c below, effectively created a presumption that precatory proposals are proper based on the Commission's own interpretation of State law, as opposed to deferring to States to resolve the question.

See Adoption of Amendments Relating to Proposals by Security Holders,

Release No. 34-12999 (Nov. 22, 1976) [41 FR 52994 (Dec. 3, 1976)] (“1976 Adopting Release”). The 1976 amendments significantly changed the approach to the existing “social policy” exclusion. Specifically, the Commission removed from the exclusion the express references to “economic, political, racial, religious, social, or similar causes.” In the adopting release for the amendments, the Commission stated that those “illustrative references” to various causes were “superfluous and unnecessary” and that, in revising the provision, the “substance” of the existing exclusionary basis was retained.

Id.

at 52997.

See, e.g., id.

at 52998 (discussing the adoption of subordinate (i)(7) of Rule 14a-8—permitting exclusion of proposals dealing with a “matter relating to the conduct of the ordinary business operations of the issuer”—and stating that matters that have “significant policy, economic or other implications inherent in them” were to be “considered beyond the realm of an issuer's ordinary business operations” and therefore not excludable under that subordinate).

For example, the Commission adopted Rule 14a-8(i)(11) [17 CFR 240.14a-8(i)(11)] to permit the exclusion of a proposal that substantially duplicates one previously submitted by another shareholder. The Commission explained that this rule was adopted “in order to eliminate the possibility of shareholders having to consider two or more substantially identical proposals submitted to an issuer by proponents acting independently of each other,” without citing any connection to State law.

See

1976 Adopting Release.

See id.

at 52996

;

17 CFR 240.14a-8, Note to subordinate (c)(1) (1977).

The Commission again modified the regulatory framework for shareholder proposals in 1983.

The adopted amendments (including revisions to the relevance, resubmission, and personal grievance exclusions) and Commission interpretive guidance on the ordinary business and mootness exclusions largely preserved the central role that the Commission's understandings of shareholder authority and corporate decision-making—traditionally the province of State law—played in the administration of the Commission's rule. Similarly, revisions made in 1998, while primarily structural and intended to improve readability by recasting the rule in a question-and-answer format, carried over the existing exclusionary framework.

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

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

see also Proposed Amendments to Rule 14a-8 Under the Securities Exchange Act of 1934 Relating to Proposals by Security Holders,

Release No. 34-19135 (Oct. 14, 1982) [47 FR 47420 (Oct. 26, 1982)] (“1982 Proposing Release”) (proposing three alternative approaches to Rule 14a-8).

See

1998 Adopting Release.

Subsequent amendments—frequently relating to shareholder-proponent eligibility, resubmission thresholds, and procedural requirements—have continued to revise a Federal overlay that either constrains or expands the rights of shareholders to present a matter for a vote without any grounding in State law.

Taken together, the evolution of Rule 14a-8 demonstrates a consistent trend: over time, through rulemaking, the Commission has increasingly assumed responsibility for defining and interpreting standards that implicate core State law concepts of corporate governance.

See, e.g.,

Procedural Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8,

Release No. 34-89964 (Sept. 23, 2020) [85 FR 70240 (Nov. 4, 2020)] (“2020 Adopting Release”) (amending requirements under the rule including resubmission thresholds and security ownership amounts for shareholder-proponent eligibility).

As this history illustrates, the evolution of current Rule 14a-8 has taken the Commission from its original 1942 posture of deferring to State law on the scope of which matters are a proper subject for shareholder action to a regime in which the rule now purports to prescribe the “few specific circumstances” under which a company is “permitted to exclude” a shareholder proposal, including a presumption that precatory proposals are “proper unless the company demonstrates otherwise.”

Throughout this evolution, there has been little meaningful analysis of State law to justify the Commission's line drawing. Instead, the Commission has relied on generalized impressions of what State law requires or on inferences drawn from its own experience administering the Federal proxy rules to construct what is, in substance, a Federal standard governing when a shareholder proposal is a proper subject for shareholder action. Nothing in the text or context of section 14(a) supports the Commission's authority to prescribe such a standard. Indeed, the plain and best reading of section 14(a) confirms that Congress did not grant the Commission such authority.

17 CFR 240.14a-8.

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

As discussed above, Rule 14a-8 dictates when a company “must include” a shareholder proposal in its proxy materials. The rule prescribes eligibility and procedural requirements that a shareholder must satisfy to have

a proposal included. It then identifies the bases on which a company may exclude a proposal. It also sets forth certain steps that a company must follow if it seeks to rely on one of those bases.

Collectively, these provisions effectively operate as a Federal standard governing when a matter is properly put before shareholders for a vote through the proxy.

Because section 14(a) empowers the Commission to regulate the proxy solicitation process—not codify its own understanding of State law rights as a matter of Federal law—Rule 14a-8 exceeds the Commission's authority under section 14(a).

See supra

section II.A.1.b.

See

Fisch 1993 at 1149-50 (“Many of the restrictions imposed by the proxy rules can be attributed to a pragmatic effort by the SEC to limit the number of shareholder proposals and to restrict use of the proxy statement to issues of general importance to shareholders. Although such limits may be desirable, they have no foundation in state or common-law restrictions regarding proper subjects to be raised at a shareholders' meeting. The SEC's authority to impose these restrictions on the use of the proxy mechanism is therefore unclear.”).

In its current form, Rule 14a-8(i) contains 13 substantive bases for exclusion. Of these, only Rule 14a-8(i)(1) and Rule 14a-8(i)(2) directly refer to State law by permitting exclusion when a proposal “is not a proper subject for action by shareholders under the laws of the jurisdiction of the company's organization,”

or when a proposal “would, if implemented, cause the company to violate any [S]tate . . . law to which it is subject.”

The remaining exclusion bases codify criteria developed by the Commission—often evolving over time—regarding what matters are appropriate for inclusion in a company's proxy materials, some of which derived from the Commission's own interpretation of State law and the rest of which lacked any identified connection to State law.

These criteria include the proposal's subject matter (such as matters relating to ordinary business operations, the director election process, or dividend amount determinations) and other considerations (such as the motivation of the proponent, economic relevance, duplication, substantial implementation, or the level of past shareholder support).

Although some of these exclusion bases may intersect with concepts found in State law, they are not derived from, and do not consistently track, State law frameworks governing shareholder rights to present a proposal at a meeting for a vote by their fellow shareholders.

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

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

See, e.g.,

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

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

Even where Rule 14a-8 incorporates State law considerations in Rule 14a-8(i)(1), the rule conditions that reference with a Commission-created presumption that non-binding, precatory proposals are proper subjects for shareholder action under State law.

This presumption, grounded in prior Commission staff “experience,” effectively places a thumb on the scale in favor of inclusion. A company bears the burden to overcome the presumption, but meeting that burden, in practice, is often difficult. State law is frequently undeveloped, ambiguous, or fact-specific with respect to shareholder proposals, and the company is required to submit an opinion of counsel supporting its views on State law, which may be particularly difficult to obtain when State law is silent on the subject. In these situations, companies could lack a meaningful pathway to meet their burden to rebut the presumption. As a result, what is framed as a presumption operates in substance as a mandate. Rather than looking or deferring to State law, the Commission has, instead, substituted its own judgment for which proposals are proper under State law.

The current Note to Rule 14a-8(i)(1) reads as follows: “Depending on the subject matter, some proposals are not considered proper under state law if they would be binding on the company if approved by shareholders. In our experience, most proposals that are cast as recommendations or requests that the board of directors take specified action are proper under state law. Accordingly, we will assume that a proposal drafted as a recommendation or suggestion is proper unless the company demonstrates otherwise.”

Beyond the 13 substantive bases for exclusion and the presumption regarding precatory proposals, the overall structure of Rule 14a-8 underscores its function as a

de facto

Federal standard for shareholder voting rights by specifying which shareholder proposals are appropriate for inclusion in company proxy materials. Rule 14a-8 has, over time and through successive revisions, evolved into a detailed framework that identifies the “few specific circumstances” in which a company is “permitted to exclude” a shareholder proposal. As an illustration of how Rule 14a-8 has expanded in complexity over time, the predecessor to Rule 14a-8 was a little over 200 words whereas the current provision is over 3,000 words. Companies seeking to exclude a proposal must explain the basis for exclusion—often by citing one or more of the 13 substantive grounds noted above—and, where the basis relies on State or foreign law, provide a supporting opinion of counsel.

The rule also imposes numerous requirements that a shareholder must satisfy to require inclusion of a proposal in the company's proxy materials, including eligibility criteria based on the amount and duration of share ownership; a requirement that the shareholder (or a qualified representative) personally attend the meeting to present the proposal; and limits on the number and length of proposals.

None of these requirements is grounded in State law.

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

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

While the procedural and eligibility requirements may have been intended to foster an orderly process for the inclusion of proposals, because the Commission is not authorized by section 14(a) to interpose Federal criteria on shareholders' or companies' State law rights, these requirements similarly are not supported by our statutory authority.

Despite the Commission's stated goal of “facilitat[ing] shareholders' exercise of [S]tate law rights”

and making the proxy process “function[ ], as nearly as possible, as a replacement for an actual in-person gathering of security holders,”

these conditions and exclusions—which constitute the vast majority of Rule 14a-8's provisions—bear little or no connection to whether the proposal is proper for a shareholder vote at the shareholder meeting under State law. Instead, these requirements create a complex Federal regime governing the rights of shareholders to present proposals for shareholder action that functionally supplants State law.

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

2007 Proxy Access Long Release at 43478.

Id.

at 43467.

See

Fisch 1993 at 1151 (“[B]oth in determining appropriate criteria for excluding shareholder proposals and in applying those criteria, the SEC does not replicate passively the annual meeting process by applying state law principles, but creates a federal common law as to what constitutes a proper subject for shareholder action. The SEC has thereby thrust itself into the role of determining the proper balance of power between management and shareholders.”) (citing Louis Loss, Fundamentals of Securities Regulation 537-38 (1983) (“Inevitably the Commission (normally its staff), while purporting to find and apply a general[ly] nonexistent state law, has been building a `common law' of its own as to what constitutes a `proper subject' for shareholder action.”)).

It might be argued that Rule 14a-8 does not dictate the scope of proposals submitted by one shareholder to be voted on by other shareholders but rather defines the conditions under which a shareholder may take advantage of the opportunity provided by Federal law to have a proposal included in the company's proxy materials.

But, as

described above, by establishing standards not found in State law for whether a shareholder proposal must be included in a company's proxy materials, the Commission effectively dictates the scope of shareholder voting rights and, therefore, exceeds its authority. Because voting by proxy has largely replaced attendance at the shareholder meeting as the primary means of corporate suffrage, applying the Commission's determinations of whether and what shareholder proposals may properly appear on a company's proxy materials effectively alters the corporate voting process.

See, e.g., Dyer

SEC,

266 F.2d 33 (8th Cir. 1959) (stating that Rule 14a-8 “affords a privilege

[to have a proposal included in the company's proxy statement], which does not otherwise ordinarily exist in favor of stockholders. Necessarily, the Commission could properly impose reasonable conditions and limitations on the scope and manner of enjoyment of the privilege, in relation to the other elements of holding stockholder meetings and conducting corporate affairs.”).

See

Fisch 1993 at 1170 (“[T]he SEC's proxy rules are not passive attempts to implement shareholders' state law rights in an increasingly large and impersonal voting system. Instead, the rules change the voting process, both by determining issues upon which shareholder democracy is appropriate and by structuring the way in which such democracy can be exercised.”).

By way of contrast, in the context of director elections, the Commission has facilitated the ability of shareholders to exercise the voting rights they have under State law. In 2021, the Commission adopted rules requiring the use of a universal proxy card in non-exempt solicitations involving director election contests.

The foundation for the universal proxy rules is the right of shareholders—explicit in State law—to vote for the election of directors.

Accordingly, the predicate question of whether under State law the proposal (

i.e.,

the election of directors) is proper for a shareholder vote at the shareholder meeting is clearly answered by State law.

To ensure that shareholders voting by proxy are able to participate in the election of directors in the same manner they could if voting in person at a shareholder meeting, the rule requires that a proxy card include the names of all duly nominated

director candidates presented for election,

thereby allowing shareholders voting by proxy in contested elections to replicate the vote they could cast if they voted in person. Such an exercise of the Commission's rulemaking authority under section 14(a) works in conjunction with State law.

See Universal Proxy,

Release No. 34-93596 (Nov. 17, 2021) [86 FR 68330 (Dec. 1, 2021)] (“Universal Proxy Release”). The universal proxy rules do not apply to solicitations involving director election contests for registered investment companies and business development companies.

See

Universal Proxy Release at 68330 (“State statutes require corporations to hold an annual meeting of shareholders for the purpose of electing directors. A shareholder's ability to participate in the election of directors is a fundamental right under state corporate law, and the process by which directors are elected is a fundamental aspect of corporate governance that is central to maintaining the accountability of directors to shareholders.”) (footnotes omitted).

See, e.g.,

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

See

Universal Proxy Release at 68331-32 (noting that universal proxy cards “must include the names of all duly nominated director candidates presented for election by any party . . .” and explaining that “[a] duly nominated director candidate is a candidate whose nomination satisfies the requirements of any applicable [S]tate or foreign law provision and a registrant's governing documents as they relate to director nominations”).

See

17 CFR 240.14a-19(e).

It is not always clear whether a matter is a proper subject for shareholder action under State law. In some instances, State law entitlements are relatively straightforward. For example, it is widely recognized that State law generally confers voting rights on equity shareholders in director elections but does not confer voting rights on bondholders in those elections.

In other instances, applying State law can present difficult interpretive questions, even within a single jurisdiction. For example, it remains uncertain whether the Delaware General Corporation Law (“DGCL”) permits precatory proposals; the statute does not speak to the question.

100

These difficulties are compounded by the fact that States vary in how they address particular governance matters.

101

But section 14(a) does not authorize the Commission to resolve ambiguous questions of State law or to impose a uniform Federal standard. Indeed, doing so has inhibited and may continue to inhibit the development of State law by State legislatures and courts interpreting the law of the relevant States of incorporation, as we discuss below.

102

Absent clear congressional direction to the contrary, State legislatures and courts interpreting State law are the appropriate bodies to develop and define the scope of shareholder rights.

Compare

8 Del. C. section 212 (granting voting rights to stockholders)

with

8 Del. C. section 221 (authorizing a corporation to grant bondholders rights similar to those held by stockholders, including the right to vote, because such rights do not exist by default under State law).

100

See

Mohsen Manesh,

The Corporate Contract & The Private Ordering of Shareholder Proposals,

50 J. Corp. L. 1, 29 (2024) (noting that the statutory text of the DGCL is silent as to whether shareholders have the right to make or vote on a precatory proposal) (“Manesh 2024”).

see also

Model Bus. Corp. Act section 7.01.

126

See e.g.,

Manesh,

supra

note 100, at 29 (“For one, there is nothing in Delaware's statute or caselaw establishing as `settled' public policy the right of shareholders to make or vote on a proposal at a shareholder meeting. As previously noted, the statutory text of the [Delaware General Corporation Law] makes no reference to such a right. And to the extent that right is recognized by case law, judicial references to it are scant and fleeting”); Pinder,

supra

note 100 (“[T]he Delaware General Corporation Law . . . does not contemplate (and thus does not expressly authorize) precatory stockholder proposals.”); Unofficial Transcript of the Roundtable Discussion Regarding the Federal Proxy Rules and State Corporation Law Before the Chairman and Commissioners of the Securities and Exchange Commission (May 7, 2007), available at https://www.sec.gov/spotlight/proxyprocess/proxy-transcript050707.pdf (“2007 Proxy Roundtable Transcript”) comment of Stanley Keller (“14a-8 in and of itself I think has created the non-binding proposal. I think as a matter of state law it really didn't exist outside of 14a-8”);

cf.

Leo E. Strine, Jr.,

Breaking the Corporate Governance Logjam in Washington: Some Constructive Thoughts on a Responsible Path Forward,

63 Bus. Law. 1079, 1088 (2008) (“Strangely, precisely because state corporation laws do not contemplate non-binding stockholder votes on anything, the SEC has permitted non-binding or `precatory' proposals on virtually everything, including takeover defenses and executive compensation.”).

127

See

2007 Proxy Roundtable Transcript

comment of Frank Balotti (“I think precatory resolutions are authorized by [section] 211 [of the DGCL], which says that a stockholder can bring before a meeting anything that is proper for a stockholder to act on. I believe that it is proper for stockholders to ask directors to do whatever, as opposed to telling directors to do whatever.”).

128

See

Fisch et al.,

supra

note 24.

129

Despite the recent enactment of Tex. Bus. Orgs. Code Ann. section 21.373, Texas law similarly does not address this question.

The Commission appears to have underestimated the challenges associated with discerning and applying State corporate law when it adopted Rule 14a-8, leading to subsequent efforts to provide clarity through incremental amendments to the rule (such as, for example, through the current codified presumption regarding precatory proposals

130

). However, as explained in section II.A, when State law is unclear or silent as to what matters can be presented to shareholders, it is not the Commission's role to fill those gaps or impose

uniformity through the Federal proxy rules.

130

See

Note to Rule 14a-8(i)(1).

In addition to the specific considerations discussed above, other developments also may have rendered Rule 14a-8's original justifications less compelling. For example, independent solicitation may have become less burdensome due to, among other factors, technological and regulatory advancements, including the introduction of the Commission's e-proxy rules (

i.e.,

notice and access).

131

In 2021, we estimated that the median basic cost of soliciting shareholders, namely, the proxy distribution fees and postage costs for the first mailing, was approximately $14,000.

132

We also estimated that the costs of a nominal solicitation—where dissidents minimize their solicitation efforts and rely on the notice-and-access mechanism—would fall within a range of $5,300 to $9,800, with the specific cost dependent on the subject company's market capitalization.

133

These estimates assumed that the dissident would meet the minimum 67 percent solicitation requirement under 17 CFR 240.14a-19 (“Rule 14a-19”), the Commission's universal proxy rule, which is not applicable if a shareholder does not solicit proxies in support of director nominees other than the company's nominees.

134

While estimating the total costs of a specific solicitation is challenging due to the variability of discretionary solicitation expenditures, we believe that technological and regulatory advancements have helped to facilitate independent solicitations.

131

See

Broadridge,

2025 Proxy Season Key Stats and Performance Ratings

(2025), available at

https://www.broadridge.com/campaign/2025-proxy-season-key-stats-and-performance-ratings

(noting that 90% of the proxy communications Broadridge processed were digital and that issuers and funds experienced an estimated $5 billion in cost savings on paper and postage). The Commission's e-proxy rules require issuers and other soliciting persons to post their proxy materials on an internet website and furnish notice of the materials' availability to shareholders. The notice and access model was intended to promote the use of the internet as a reliable and cost-efficient means of making proxy materials available to shareholders.

See Amendments to Rules Requiring Internet Availability of Proxy Materials,

Release No. 33-9108 (Feb. 22, 2010) [75 FR 9074 (Feb. 26, 2010)].

132

See

Universal Proxy Release, at 68359 (the Commission calculated this estimate based on industry data provided by a proxy services provider for a sample of 31 proxy contests from July 1, 2018 through June 30, 2019).

133

See id.

at 68359 n.273. See Table IV in section IV.B.3.b for estimates of proxy solicitation costs between 2022 and 2025.

134

Rule 14a-19 requires the use of universal proxy cards by companies and by persons soliciting proxy votes for their own candidates in contested director elections. The universal proxy card must include the names of all company and dissident director nominees. Rule 14a-19 establishes certain notice and filing requirements, as well as formatting and presentation requirements for universal proxy cards, and requires dissidents to solicit at least 67% of the voting power of shares entitled to vote on the election of directors. Rule 14a-19 does not apply, however, in a “zero-slate” campaign in which the dissident does not nominate or solicit proxies for its own director nominees.

In addition, although the original purpose of Rule 14a-8 was not to facilitate shareholder engagement or communication, shareholders frequently use the rule for these purposes, as discussed in section II.A.2.b.i below. To the extent shareholders use Rule 14a-8 for these purposes, technological advancements have given rise to a wide range of alternative channels—such as online platforms and social media forums—that facilitate communication among shareholders, enable the expression of shareholders' views, and allow investors to attempt to influence corporate behavior.

135

These means were not available when Rule 14a-8 was first adopted. Modern technology allows investors—including smaller shareholders—to communicate both with management and fellow shareholders, mitigating concerns that rescinding Rule 14a-8 would limit engagement to larger shareholders or those with more access to management or board members.

136

135

See, e.g.,

Donna Fuscaldo,

Say Gives Retail Investors A Voice And Tesla Listens,

Forbes (Feb. 19, 2019), available at

https://www.forbes.com/sites/donnafuscaldo/2019/02/19/say-gives-retail-investors-a-voice-and-tesla-listens/

(describing a digital platform that offers retail investors the ability to engage with companies they invest in); Seth C. Oranburg,

A Little Birdie Said: How Twitter Is Disrupting Shareholder Activism,

20 Fordham J. Corp. & Fin. L. 695, 707 (2015), available at

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2544363

(“Activists can now access virtually all shareholders and influence public opinion through social networks, relatively unencumbered by reporting requirements under SEC rules.”); Taylor Nicole Rogers,

Robby Starbuck: the activist pushing U.S. companies to ditch their DEI vows,

Fin. Times (Sep. 5, 2024), available at

https://www.ft.com/content/0c8974ee-60bf-4edb-839c-bc24b8ecbc81

(reporting on how a shareholder uses his social media presence to influence corporate initiatives).

136

Cf.

Fisch et al.,

supra

note 24 (suggesting that eliminating precatory proposals would lead to only those with large share holdings or personal relationships with board members having access to the board).

b. Rule 14a-8 Has Had, and Will Continue To Have, Certain Unintended Consequences

i. Rule 14a-8 Has Become a Mechanism for Influencing the Interactions Between Companies and Their Shareholders in Ways That Are Inconsistent With the Rule's Original Purpose

Under Rule 14a-8, a company is required to include a shareholder proposal in its proxy statement and form of proxy unless it can identify a basis to exclude it, in which case it must file with the Commission its reasons for exclusion.

137

If a company excludes or attempts to exclude a proposal, it may be exposed to litigation risk.

138

Proponents may thus use Rule 14a-8 in an attempt to gain leverage in negotiations with company management or to secure private benefits from such negotiations.

139

Use of Rule 14a-8 in this way represents a departure from the rule's original purpose and implicates matters more appropriately addressed by State law.

137

See supra

section II.A.1.c.

138

See, e.g., DiNapoli

BJ's Wholesale Club Holdings, Inc.,

No. 26-cv-11075, 2026WL1762143 (D. Mass. Apr. 22, 2026);

Heritage Found. & Am. Conservative Values ETF

Airbnb, Inc., 1:25-cv-00676

(D.Del. Feb. 12, 2026).

139

See

Sarah C. Haan,

Shareholder Proposal Settlements and the Private Ordering of Public Elections,

126 Yale L.J. 262, 298-299 (2016) (stating that shareholder proponents are incentivized to negotiate settlements because they “may extract private benefits from settlements” and that they may “bring a proposal solely for the purpose of bargaining it away, or to put pressure on management to accede to a different demand”).

For example, proponents may submit proposals to initiate a dialogue with a company when they have little or no intent for their proposals to actually be included in company proxy materials and voted on by fellow shareholders. In fact, many shareholder proposals today are resolved without a shareholder vote, suggesting that the Rule 14a-8 process has deviated from its original purpose.

140

For instance, based on available data, proponents withdrew their proposals at rates ranging from 18.4 percent to 32.1 percent during the four-year period between 2021 and 2025, with approximately 18 percent of proposals being withdrawn in 2025.

141

Companies and proponents alike may have incentives to settle privately, rather than proceed to a shareholder vote.

142

For companies, the perceived

advantages of private resolution may include reducing reputational risk associated with proposals, mitigating litigation risk related to statements made in opposition or in connection with exclusion, or avoiding the potentially greater costs associated with either including a proposal in the proxy materials or seeking to exclude it under the Commission's rules.

143

For proponents, reaching a settlement can provide a more certain path to achieving a tangible outcome since shareholder proposals are typically non-binding even when they receive majority support.

144

The frequent withdrawal of shareholder proposals as part of the Rule 14a-8 process does not fully align with Congress's intent that section 14(a) and the Federal proxy rules promote “fair corporate suffrage.”

145

Rather than having their proposals reach a shareholder vote through the proxy process, proponents often utilize the existence of the rule as leverage for private negotiations with companies, while company management may also find it advantageous when proposals are withdrawn.

146

140

See id.

at 293 (“[I]n virtually all cases, the private settlement of a proposal undercuts the basic justifications for the shareholder-proposal framework under Rule 14a-8.”).

141

See

Subodh Mishra,

2025 U.S. Governance Post-Season Review Evolving Priorities in a Shifting Landscape,

ISS STOXX, Harv. L. Sch. F. Corp. Governance (Oct. 15, 2025), available at

https://corpgov.law.harvard.edu/2025/10/13/2025-u-s-governance-post-season-review-evolving-priorities-in-a-shifting-landscape/

(explaining that, of proposals submitted from Jan. 1 to June 30, 2025, 58% were voted on, 23.6% were omitted from the proxy statement, and 18.4% were withdrawn or not presented). Note that these numbers do not represent the full scope of withdrawn proposals, such as proposals that were withdrawn before companies filed no-action requests to exclude them from their proxy materials.

142

Cf., e.g.,

Ross Kerber,

This conservative activist is no fan of Trump's SEC,

Reuters.com

(Mar. 4, 2026), available at

https://www.reuters.com/markets/us/this-conservative-activist-is-no-fan-trumps-sec-2026-03-04/

(quoting a shareholder proponent as saying, “[C]ompanies hate

shareholder proposals. They're a nuisance to them. Usually somebody's bringing it because they have a criticism of the company and they just, they want to do everything they can that's possible to get the proponent to withdraw. So if they can work out some kind of minimally painful step to [get] us to withdraw, they do it.”).

143

See

Haan,

supra

note 139, at 293-297;

see also

Kobi Kastiel and Yaron Nili,

The Giant Shadow of Corporate Gadflies,

94 So. Cal. L. Rev. 569, 617 (2021).

144

See

Nickolay Gantchev & Mariassunta Giannetti,

The Costs and Benefits of Shareholder Democracy,

Eur. Corp. Governance Inst. (Nov. 2019), available at

https://www.ecgi.global/sites/default/files/working_papers/documents/finalgantchevgiannetti_2.pdf

(“Gantchev Article”) (noting that an “overall low implementation rate” of approximately 16% of proposals “indicates that management may choose not to implement proposals even when they are approved by a majority of the voting shareholders”);

see also

John G. Matsusaka et al.,

Can Shareholder Proposals Hurt Shareholders? Evidence from Securities and Exchange Commission No-Action -Letter Decisions,

64 J.L. & Econ. 107, 110 (2021), available at

https://www.journals.uchicago.edu/doi/epdf/10.1086/710828

(“When a proposal is withdrawn, it often means that the company granted some concession to the proponent, who in exchange withdrew the proposal.”).

145

H.R. Rep. No. 1383, 73d Cong., 2d Sess. 13 (1934).

146

See., e.g.,

Ross Kerber,

Shareholder activist Behar says Trump is `disassembling capitalism,' Reuters.com

(Jan. 21, 2026), available at

https://www.reuters.com/sustainability/sustainable-finance-reporting/shareholder-activist-behar-says-trump-is-disassembling-capitalism-2026-01-21/

(quoting a shareholder proponent as saying “Most companies will have a dialogue. There are those where you have to escalate by filing a resolution, about half of those then say, `OK, if you withdraw it, we'll take some action.' Then there are the really resistant ones, about 25% or so, that you have to go to a vote . . . We've had some of our biggest wins at 6% (support), we've had some of our biggest losses at 80%. We want to bring forth new ideas.”).

Furthermore, Rule 14a-8 can serve as a mechanism for shareholder proponents to advance interests that in many cases may not be shared by a company's shareholders at large. For instance, in 2025, only 56 out of 786 submitted proposals (seven percent) received majority support.

147

In addition, a significant proportion of shareholder proposals are submitted by a small number of proponents who advance substantially similar proposals across numerous companies.

148

In 2025, 10 shareholder proponents submitted an aggregate of 58 percent of all proposals (455 out of 786).

149

147

The data cover proposals submitted for meetings held in calendar year 2025. Data is retrieved from the FactSet SharkRepellent Proxy Proposal dataset, which includes around 5,000 U.S.-incorporated public companies and some foreign-incorporated companies. Unless otherwise specified, we exclude from our analysis shareholder proposals that are not subject to Rule 14a-8, such as proposals related to proxy contests and other proposals appearing in dissident shareholders' proxy soliciting material, proposals that were raised from the floor of the annual or special meetings and were not submitted to appear in the companies' proxy statements, and proposals submitted for a vote at meetings of foreign private issuers, as defined in 17 CFR 240.3b-4, which are not subject to the Federal proxy rules.

See

section IV.B.3.a.

148

See

Gantchev Article

supra

note 144 (“The press has widely reported that a small group of individuals, often referred to as corporate gadflies, submits a disproportionate number of proposals. These individual sponsors, such as John Chevedden and William Steiner, do not acquire large stakes and are not particularly wealthy, but submit dozens of shareholder proposals every year, convinced that `it is the right thing to do.' ”);

see also

Kobi Kastiel and Yaron Nili,

The Giant Shadow of Corporate Gadflies,

94 So. Cal. L. Rev. 569, 591 (2020) (reporting that five individual investors accounted for almost 40% of shareholder proposals submitted to S&P 500 companies in 2018).

See

section IV.B.3.a.

149

See supra

note 147 for source of the data.

Such use is counter to how the Commission intended the rule to be used. For example, when the rule was first adopted, Chairman Purcell explained, “[I]f [a shareholder proponent] were going to use the corporate proxy machinery for making a stump speech for some political party, that obviously is without the spirit of [the rule] . . . .”

150

The Commission also subsequently noted that it did not intend for the rule to be used as a “publicity mechanism” for advancing personal or partisan interests unrelated to the interests of a company's shareholders.

151

Yet Rule 14a-8 often serves as a stump from which, figuratively, a small number of shareholders give speeches.

152

150

See

Statement of Chairman Purcell.

151

See, e.g.,

1982 Proposing Release at 47422 n.8 (explaining that “the rule was not designed to burden the proxy solicitation process by requiring the inclusion” of proposals submitted by proponents “us[ing] the rule as a publicity mechanism to further personal interests that are unrelated to the interests of security holders as security holders”).

152

See, e.g.,

Business Roundtable,

supra

note 112 (“One repeat proponent openly stated they would not withdraw their proposal, not due to company-specific concerns, but because keeping it on the proxy statement provided a larger platform for their cause.”).

Furthermore, since Rule 14a-8 includes substantive and procedural bases that companies may use to exclude proposals that otherwise may be permitted under State law, companies may seek to use the rule to exclude proposals they disfavor or to limit shareholder involvement in corporate affairs. The various default positions, bases for exclusion, and eligibility criteria have made Rule 14a-8 a contested vehicle for influencing corporate governance practices and other corporate behavior. However, the allocation of power between shareholders and management, as well as determinations about the appropriate role of shareholder advocacy in corporate governance, are matters for the States to resolve and not the appropriate province of the Commission.

153

See

Fisch 1993 (explaining that Rule 14a-8 permits shareholder proposals to be excluded from company proxy materials for reasons that are not grounded in State law, discussing the rule's role in shaping corporate governance, and describing the role of Federal and State law in regulating proxy solicitations and shareholder voting).

ii. The Existence of Rule 14a-8 Places the Commission in the Position of Making Judgments About the Application of State Law That Are Best Left to Other Actors

In our experience, Rule 14a-8 has drawn the Commission into matters that should be addressed by State legislatures, courts, and, if permitted by relevant State law, companies.

154

Although certain aspects of State law may be clear—for example, State law generally affords shareholders the right to elect directors

155

and amend the bylaws

156

—many other areas contain

gaps, ambiguities, or conflicting interpretations. State legislatures and courts—not the Commission—are the appropriate authorities to resolve those gaps, ambiguities, and conflicts. Similarly, it is not the Commission's role to synthesize potentially conflicting State laws for purposes of administering the Federal proxy rules. For example, State corporate codes are silent as to whether precatory proposals are proper to present for a shareholder vote.

157

Historically, however, in assessing whether a proposal is a proper subject for shareholder action under State law, the Commission has assumed precatory proposals are presumptively proper.

158

The Commission cannot provide definitive answers to State law questions. Such questions are properly decided by courts, with the highest court in each State exercising final authority on questions of State law.

159

More generally, we do not believe that section 14(a) authorizes the Commission to direct or influence substantive corporate governance matters that fall within the purview of State legislatures, courts, and the private ordering mechanisms established in a company's governing documents.

154

See

Alan R. Palmiter,

The Shareholder Proposal Rule: A Failed Experiment in Merit Regulation,

45 Ala. L. Rev. 879, 910 (1994) (citing then-Commissioner Richard Roberts who stated that “it is neither fair nor reasonable to expect securities experts to deduce the prevailing wind on public policy issues that have yet to be addressed by Congress in any decisive fashion.”).

155

See, e.g.,

Julian Velasco,

The Fundamental Rights of the Shareholder,

40 U.C. Davis L. Rev 407 (2006), available at

https://scholarship.law.nd.edu/cgi/viewcontent.cgi?article=1314&context=law_faculty_scholarship

(noting that the right to elect directors is a fundamental right of shareholders); 8 Del. C. section 109(a) (“the power to adopt, amend or repeal bylaws shall be in the stockholders entitled to vote.”).

156

See

Albert H. Choi et al.,

Contractarian Theory and Unilateral Bylaw Amendments,

104:1 Iowa L. Rev 1, 36 (2018), available at

https://ssrn.com/abstract=3024873

(stating that under both the

MBCA and DGCL, the shareholders' right to amend bylaws cannot be restricted).

157

See, e.g., supra

note 100.

158

See supra

section II.A.1.c.

159

See Fidelity Union Trust Co.

Field,

311 U.S. 169, 177 (1940). Decisions by courts, not the Commission, provide precedent that proponents and companies may appropriately rely on going forward.

The continued existence of a Federal rule governing shareholder proposals—even one that purports facially to defer to State law—encourages companies and shareholders to look to the Commission to resolve ambiguities in the application of such rule. Moreover, because the Commission has authority to bring actions to enforce compliance with the proxy rules, including Rule 14a-8, companies inevitably turn to the Commission and its staff for guidance on the application of the Federal rule.

160

As a result of the foregoing, State authorities who are the appropriate bodies to resolve corporate governance matters may have little incentive or occasion to provide clarity on the role of shareholder proposals. This dynamic is reflected in the fact that, with the recent exception of Texas,

161

no State has adopted legislation governing shareholder proposals in more than 80 years since Rule 14a-8 was first adopted, and we are not aware of any companies that have incorporated their own framework for addressing shareholder proposals into their governing documents.

162

Under the proposed rescission of Rule 14a-8, the Commission would continue to oversee the Federal proxy process but would no longer determine which shareholder proposals must be presented to shareholders through a company's proxy materials. Removing the Commission from the shareholder proposal process would ensure that the appropriate bodies—

i.e.,

State legislatures, courts, and, when permitted by relevant State law, companies—determine the circumstances under which proposals should be included in a company's proxy materials.

160

As discussed in section IV.B.3.a, during the 2022-2025 period, companies submitted 1,073 no-action requests to the Commission to exclude shareholder proposals submitted under Rule 14a-8 (corresponding to 33 percent of all proposal submissions).

161

See

Tex. Bus. Orgs. Code Ann. section 21.373 (for eligible publicly traded companies that opt in, requiring a shareholder or group of shareholders to hold a minimum amount of a company's securities for a minimum amount of time, and to solicit a minimum percentage of shares entitled to vote on the proposal, in order to submit a matter for a shareholder vote).

162

We are, however, aware of a small number of companies that have recently opted into Tex. Bus. Orgs. Code Ann. section 21.373.

iii. The Presence of a Federal Rule Has Inhibited the Development of State Law and Private Ordering

Although States can enact laws determining the appropriate role of shareholder proposals and establishing whether and to what extent shareholders have access to company proxy materials for their proposals, they have largely declined to do so. As discussed above, Rule 14a-8 was not intended to displace State law; rather, it was originally designed to facilitate State law rights through a Federal disclosure and proxy solicitation framework.

163

Although the rule has evolved over time in ways that stray from this original intent, a remnant of this principle remains in Rule 14a-8(i)(1), which expressly permits companies to exclude proposals that are “not a proper subject for action by shareholders under the laws of the jurisdiction of the company's organization.”

164

Accordingly, where State law sets forth standards governing which proposals may be presented for a vote of shareholders, a proposal not meeting those standards is excludable under Rule 14a-8(i)(1) as “not a proper subject for action by shareholders.”

165

Similarly, if permitted by State law, companies can adopt standards in their governing documents, such as establishing company-specific ownership thresholds for presenting proposals for shareholder action or limits on the types of proposals that may be presented, and a proposal not complying with those requirements could be excluded under Rule 14a-8(i)(1).

166

For example, if State law or a company's governing documents (if permitted by State law) were to disallow precatory shareholder proposals, then a company may exclude such precatory proposals pursuant to Rule 14a-8(i)(1).

163

See

section II.A.1.a.

164

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

165

See Shareholder Proposals Relating to the Election of Directors,

Release No. 34-56914 (Dec. 6, 2007) [72 FR 70450 (Dec. 11, 2007)] (“With respect to subjects and procedures for shareholder votes, most state corporation laws provide that a corporation's charter or bylaws can specify the types of proposals that are permitted to be brought before the shareholders for a vote at an annual or special meeting. Rule 14a-8(i)(1) supports these determinations by providing that a proposal that is not a proper subject for action by shareholders under the laws of the jurisdiction of the corporation's organization may be excluded from the corporation's proxy materials.”);

see also Shareholder Proposals Relating to the Election of Directors,

Release No. 34-56161 (July 27, 2007) [72 FR 43488, 43490 (Aug. 3, 2007)] (same).

166

See supra

notes 161 and 162.

Although current Rule 14a-8(i)(1) accommodates the ability of States and their domiciled companies to tailor the shareholder proposal process to reflect their own views about the optimal approach to corporate governance and the particular circumstances of the company and its shareholders, States and companies have, with one notable exception, generally declined to exercise this authority to date.

167

This reluctance may stem from concerns that adopting standards that deviate from those in Rule 14a-8 could bring unwanted public attention and criticism from investors and other parties. In this regard, State authorities may be disinclined to undertake politically contentious decisions and companies may fear that adopting such standards could lead to accusations of disenfranchising shareholders, trigger organized investor campaigns, and/or

result in voting recommendations against board nominees by proxy advisory firms. Indeed, simply being singled out as insufficiently responsive to a perceived shareholder right could impose reputational costs for companies.

168

Despite the capacity of States to enact laws and companies to engage in private ordering under Rule 14a-8(i)(1), there have been only limited efforts to tailor the modern shareholder proposal regime.

169

167

But see supra

notes 161 and 162. We also note that companies have sought to exclude shareholder proposals based on limitations in their governing documents about what matters shareholders may vote on.

See, e.g.,

Senior Hous. Props. Tr., SEC Staff No-Action Letter, 2019 WL 530450 (Mar. 13, 2019) (agreeing with the company that a proposal could be omitted from the proxy statement under 17 CFR 240.14a-8(b), which, among other things, requires a proponent to hold “securities to be entitled to vote on the proposal,” because the company's governing documents limited the matters shareholders could vote on and the proposal dealt with a matter that was not within the enumerated list of matters as to which shareholders were entitled to vote on); RAIT Financial Trust, SEC Staff No-Action Letter, 2017 WL 373305 (Mar. 20, 2017) (similar); Scripps Networks Interactive, Inc., SEC Staff No-Action Letter, 2016 WL 390053 (Jan. 14, 2016) (agreeing with exclusion of a proposal where the company had multiple classes of stock and the proponent owned a class of common shares that were not entitled to vote on the proposal).

168

See

Manesh 2024 (“The risk of political backlash, resistance among investors, and other practical considerations may lead some, perhaps most, companies to leave shareholder proposal rights untouched.”).

169

See supra

note 161 and accompanying text.

In addition, despite prior Commission statements to the contrary,

170

some uncertainty may exist as to whether States and companies can establish shareholder proposal standards that differ from those set forth in Rule 14a-8.

171

Part of this uncertainty may stem from an early judicial decision—

SEC

Transamerica Corp.

172

—

which some have interpreted as holding that Rule 14a-8 preempts State law and privately ordered procedures governing the submission of shareholder proposals.

173

Rescinding Rule 14a-8 would eliminate any implication of preemption stemming from

Transamerica

or otherwise and thus remove that potential disincentive for States to develop their own laws governing shareholder proposals. To the extent some believe that Rule 14a-8 currently preempts State law, we expect that if the rule were rescinded, States and/or companies, in compliance with State law, would be more inclined to adopt their own standards for when shareholder proposals must be included in, or may be excluded from, the company's proxy materials.

170

See supra

note 165;

but see

1982 Proposing Release. By proposing, in the 1982 Proposing Release, a new rule that would have allowed companies and their shareholders to establish customized requirements for submitting and including shareholder proposals in the company's proxy materials—subject to shareholder approval, periodic reapproval, and potentially certain minimum ownership and other requirements—the Commission may have suggested that the Federal rule preempts State law.

171

See, e.g.,

Elizabeth Ising, Ronald Mueller & Julia Lapitskaya,

Considerations for Shareholder Proposals in a Post-Rule14a-8 World,

Harv. L. Sch. F. Corp. Governance (June 15, 2026), available at

https://corpgov.law.harvard.edu/2026/06/15/considerations-for-shareholder-proposals-in-a-post-rule-14a-8-world/#10

(“As Rule 14a-8 has increasingly contained provisions that are not reflected in state corporate laws, it has become unclear whether and to what extent Rule 14a-8 preempts state law.”).

172

163 F.2d 511 (3d Cir. 1947).

173

See, e.g.,

Jill Fisch, The

Transamerica

Case, The Iconic Cases in Corporate Law (Jonathan Macey, ed. 2008) (stating that the court “concluded that any issuer-specific limitations on the shareholder voting power conferred by [Rule 14a-8] were improper”).

Finally, we note that, to the extent State law or a company's governing documents were to require inclusion of a shareholder proposal in a company's proxy statement, the company would be required to comply with the Commission's proxy rules with respect to that proposal.

c. Retaining Rule 14a-8 Is Unwarranted and Unlikely To Avoid Unintended Consequences

Even if the Commission had authority to retain some version of Rule 14a-8, doing so would require the Commission to establish certain baseline assumptions, such as whether shareholder proposals should, by default, be included in or excluded from a company's proxy materials. Whatever default rule the Commission were to select—inclusion or exclusion—would establish the starting point for how disputes are resolved. The rule also would have to articulate what a company or a shareholder must do to opt out of the default. In doing so, the rule necessarily would advantage one side over the other by shaping the burdens of persuasion and the practical likelihood of success. Such a structural choice, even if made with the intention of neutrality, would have the practical effect of shaping how companies and shareholders interact, negotiate, and ultimately view the costs and utility of the shareholder proposal process.

Even if the Commission could attempt to amend the rule to completely defer to State law, in practice we do not believe such an alternative would address our fundamental concern about the Commission's entanglement in State law issues. So long as a Federal rule remains, experience has shown that parties will continue to look to that rule—and the Commission—to resolve questions about the inclusion of shareholder proposals in a company's proxy materials given the greater uniformity offered by a Federal framework and notwithstanding the fact that State law determines the proper scope of a shareholder's power to present a proposal to their fellow shareholders for a vote.

174

The history of Rule 14a-8 underscores this dynamic as, over time, the Federal rule has become the primary reference for determining the scope, operation, and limits of shareholder proposals, effectively displacing the authority of State law notwithstanding the Commission's disclaimers of any intention to do so. Thus, even if the Commission had the authority to retain a version of Rule 14a-8—with the clear intention of deferring to State law—over time it would inevitably be drawn into matters that should be left to States or private ordering.

174

See supra

note 102.

In addition, we do not believe that retaining such a version of Rule 14a-8 would be warranted. We expect that total rescission of the rule would lead the States and/or (where authorized by State law) companies to be more inclined to adopt their own standards in this area. State courts are the proper venue to resolve any disputes that may arise directly based on State law and the terms of corporate governance documents, without need for a Federal rule that would itself necessarily incorporate State law (and risk overriding it). Accordingly, we believe it is prudent for the Commission to defer to States and companies to determine if, and under what circumstances, shareholder proposals must be included in company proxy materials.

175

To the extent the Commission has previously suggested that the mere omission of a shareholder proposal from a company's proxy materials could render those materials materially false or misleading in the absence of a rule like Rule 14a-8, we disagree.

Cf.

Statement of Chairman Purcell (“The proxy statement purports to tell the stockholders everything that is going to be taken up at the meeting. The management knew [shareholder] proposals were going to be taken up at the meeting. It knew that it intended to oppose them. Any [proxy] statement which did not include those proposals and the position of the management was obviously misleading, because the soliciting material purported to tell the stockholders everything that is going to be taken up at a meeting that management knew about.”). The omission of a shareholder proposal from a company's proxy materials or the failure to disclose that it will be considered at the meeting is generally not, without more, materially false or misleading.

Cf. Heinze

Tesco Corp.,

971 F.3d 475 (5th Cir. 2020) (rejecting a pure-omissions theory under Rule 14a-9);

cf. also Basic

Levinson,

485 U.S. 224, 239, n.17 (1988) (“Silence, absent a duty to disclose, is not misleading under Rule 10b-5.”);

Macquarie Infrastructure Corp.

Moab Partners LP,

601 U.S. 257, 266 (2024) (holding that pure omissions are not actionable under Rule 10b-5(b)). There could, however, be situations where the failure to disclose a shareholder proposal could be false and misleading under the circumstances. If, for example, management were to state that it was unaware of any other business to come before the meeting when it had in fact been advised that a shareholder intended to present a matter, such statement may be materially false and misleading in the context of soliciting discretionary voting authority for such matter.

3. Investment Company Considerations

Section 20(a) of the Investment Company Act includes substantially the same language as section 14(a) but relates to proxies, consents, or authorizations in respect of any security issued by registered investment companies. The Commission has used the authority under section 20(a) of the

Investment Company Act to adopt a rule that requires any proxy, consent, or authorization with respect to any security issued by a registered investment company to comply with the rules and regulations adopted pursuant to section 14(a) of the Exchange Act.

176

As a result, registered investment companies are subject to Rule 14a-8 regardless of whether they have a class of equity securities registered under section 12 of the Exchange Act.

176

17 CFR 270.20a-1.

We are proposing to rescind Rule 14a-8 for all companies, including registered investment companies and business development companies

177

(together, “regulated funds”). We recognize that the regulatory framework for regulated funds is different from that of other companies that have a class of equity securities registered under section 12 of the Exchange Act (“operating companies”). In particular, the Investment Company Act provides regulated fund shareholders with voting rights that are independent of State law corporate governance provisions.

178

For example, section 18(i) of the Investment Company Act requires that, with limited exceptions, every share of investment company stock must “be a voting stock and have equal voting rights with every other outstanding voting stock.”

179

In addition, several provisions of the Investment Company Act require shareholder approval by vote on matters such as changes to an investment company's fundamental investment policies, approval of an investment company's advisory contract, or certain director elections.

180

Moreover, any investment advisory agreement with a regulated fund must provide that it may be terminated at any time by vote of a majority of the outstanding voting securities.

181

177

Business development companies are a category of closed-end investment company that do not register under the Investment Company Act but rather elect to be subject to the provisions of sections 55 through 65 of the Investment Company Act.

See

section 2(a)(48) of the Investment Company Act [15 U.S.C. 80a-2(a)(48)].

178

See

New Germany Fund, SEC No-Action Letter (May 8, 1998) (the Commission declined to provide a no-action position with respect to a fund's request to exclude a shareholder proposal to terminate the fund's advisory agreement based on the argument that State law vested in the board exclusive authority to terminate the agreement and noted that “Section 15(a)(3) of the [Investment Company] Act confers independent authority on the Fund's shareholders to terminate the Fund's investment advisory agreement at any time”).

179

15 U.S.C. 80a-18(i).