SEC Proposes Rescinding the Federal Shareholder Proposal Rule

The SEC has issued a proposing release titled “Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4.” If adopted, these proposed amendments would rescind Rule 14a-8, which permits eligible shareholders to include certain proposals in a company’s proxy statement, and expand the ability of a company to exercise discretionary voting authority over proxies it receives even if a shareholder proponent conducts its own solicitation of proxies for a shareholder proposal.

In July 2026 remarks, SEC Chairman Paul Atkins indicated that the SEC was “holistically evaluating” Rule 14a-8, reiterating concerns about the relationship of Rule 14a-8 with state corporate law that he had expressed as early as 2008. In his statement accompanying the new proposals, Chairman Atkins describes limiting federal intrusion into state corporate law and modernizing the proxy rules as “two of my highest regulatory priorities.”

• Rule 14a-8 – Inclusion of shareholder proposals in company proxy materials
  • Current framework: A qualifying shareholder may require a company to include an eligible proposal in its proxy statement and proxy card. The federal rule establishes eligibility and procedural requirements, as well as substantive grounds for excluding proposals. Because the company distributes the proposal through its own materials, the proponent does not have to prepare and distribute separate proxy materials.
  • Proposed change: Rule 14a-8 would be rescinded for operating companies and regulated funds, including registered investment companies and business development companies. Whether a company must include a shareholder proposal would instead depend on state law and, where state law permits, the company’s charter or bylaws.
  • Practical effect: If no state law or company-specific inclusion right applies, a proponent could still present a permissible proposal at a shareholder meeting, but generally would need to prepare and distribute its own proxy materials to solicit votes independently.

• Rule 14a-4 – Discretionary voting authority over omitted proposals
  • Current framework: When a company receives timely notice of a proposal submitted outside Rule 14a-8 and omits it from its proxy card, the company may seek discretionary voting authority over the proxies it receives if it makes the required disclosure. The company cannot exercise that authority, however, if the proponent satisfies specified notice and solicitation requirements, including soliciting holders of at least the percentage of shares needed to approve the proposal. When the company is permitted to exercise discretionary voting authority, individual shareholders do not currently receive a checkbox allowing them to withhold that authority.
  • Proposed change: A company could exercise discretionary voting authority over proxies it receives even if the proponent conducts the specified independent solicitation. The company would have to include in its proxy statement a brief description of the omitted proposal and disclose how it intends to vote. Its proxy card would cross-reference that disclosure and provide a checkbox allowing each shareholder to withhold discretionary voting authority for that shareholder’s shares.
  • Practical effect: A proponent’s independent solicitation would no longer prevent the company from exercising discretionary voting authority over all proxies it receives. Instead, each shareholder would decide whether to allow the company to vote that shareholder’s shares on the omitted proposal.

The SEC notes in the proposing release that Rule 14a-8 exceeds the Commission’s statutory authority, because shareholder voting rights and internal corporate governance are traditionally governed by state law. The proposing release also indicates that mandatory inclusion of shareholder proposals in company proxy materials increases the negotiating leverage of shareholder proponents. In this regard, proponents can submit or threaten to submit shareholder proposals and seek corporate commitments in exchange for withdrawing them. The SEC points to the frequency of negotiated withdrawals as an indication that Rule 14a-8 sometimes serves as leverage in private negotiations, rather than as a mechanism for obtaining a shareholder vote on a specific matter.

If adopted, rescission would replace the uniform federal shareholder proposal process with greater reliance on “private ordering,” procedures established through state law and, where authorized, a company’s charter and bylaws. Those frameworks could determine who may submit proposals, which matters are permissible for a shareholder vote in those proposals, and when inclusion in a company’s proxy statement is required. The SEC estimates approximately $39.6 million in annual company cost savings as a result of rescinding Rule 14a-8, while acknowledging possible unquantified costs, such as reduced shareholder participation, legal uncertainty, and transition expenses. The proposal is not final and remains subject to public comment.

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