The SEC has announced that it will largely stop giving advance guidance on whether companies may leave shareholder proposals out of their annual proxy materials. This means companies can now decide on their own to exclude proposals, with only limited review by the SEC. As a result, more proposals may be blocked before they ever reach a vote, and shareholders who disagree will need to challenge these decisions after the fact, possibly in court. This shift reduces the market’s ability to see what shareholders care about and makes it harder for investors to hold companies accountable.
The U.S. Securities and Exchange Commission has announced that, for the current proxy season, its Division of Corporation Finance will no longer substantively respond to most company requests to exclude shareholder proposals under Exchange Act Rule 14a-8.1 With limited exceptions, the staff will not express views on whether a company may omit a proposal from its proxy. The staff will continue to review requests only in cases where a proposal is not a proper subject for shareholder action under state law.
This change is significant. For decades, the staff’s informal “no-action” process has served as a practical gatekeeper: companies would seek the staff’s views on whether exclusion grounds, such as ordinary business, substantial implementation, duplication, resubmission thresholds, or procedural defects, were available. Staff responses were not binding, but they provided a widely accepted roadmap and deterrent against aggressive exclusions. By stepping back, the SEC is removing these disputes from its predictable advisory process and placing more responsibility on companies to decide for themselves, which increases the risk of after the fact enforcement issues and legal challenges.
For issuers, the immediate implication is greater discretion with less procedural friction. Companies can now omit proposals without awaiting staff concurrence, provided they believe they have a defensible basis. The only category the staff will substantively consider is whether a proposal is a proper subject under state law. For shareholders who submit proposals, this means more uncertainty and a higher hurdle to get their proposals to a vote. Without a staff review to temper exclusion decisions, more proposals are likely to be omitted, and the burden will fall on proponents to challenge exclusions in court or seek other remedies after the fact. The staff’s non-objection letters, which are based only on what companies tell them, will no longer give the reliable signals that investors have used to plan their campaigns and allocate resources.
This dynamic has broader market consequences. Shareholder proposals are among the most transparent mechanisms for gauging investor sentiment on governance, risk, and policy topics, from board accountability to climate transition plans to capital allocation. When proposals reach the ballot, vote outcomes provide comparable, decision-useful signals to boards, managers, investors, and regulators. If companies can more readily block proposals from reaching a vote, the market loses a valuable measure of shareholder positioning. Less data on shareholder preferences means less discipline for issuers and less accountability to owners, particularly on topics where management and shareholders may diverge.
The SEC’s announcement also injects timing and litigation risk into an already compressed proxy calendar. Proponents will need to anticipate earlier, more frequent, and more varied exclusion decisions, and assess whether to pursue declaratory or injunctive relief on accelerated timetables. Companies will need robust internal records to substantiate exclusion determinations and carefully drafted proxy disclosures explaining omissions, mindful that staff responses, if sought, do not insulate against enforcement. In the near term, this fragmentation will raise costs and increase variance in outcomes, diminishing the predictability that has been a hallmark of the 14a-8 process.
The net effect is straightforward: enabling corporations to block votes from even happening reduces the market’s ability to observe where shareholders stand on key issues. That loss of transparency can only be bad for shareholders. It blunts the signaling power of the ballot, weakens accountability, and undermines the informational ecosystem that helps investors evaluate governance quality and long-term risk. Whatever the operational rationale for the SEC’s retrenchment this season, the practical result will be fewer votes, thinner data, and a diminished shareholder voice.
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[1] https://www.sec.gov/newsroom/speeches-statements/statement-regarding-division-corporation-finances-role-exchange-act-rule-14a-8-process-current-proxy-season;
Written by:
Michael Watson
Senior Legal Counsel
