SEC Guidance on Operations During the U.S. Federal Government Shutdown

The current funding authorization for most of the U.S. federal government ended at 12:01 a.m. on Wednesday, October 1, 2025. All non-essential federal government services shut down at that time. The Division of Corporation Finance (the Division) of the Securities and Exchange Commission (SEC or the Commission) has posted guidance in the form of a set of FAQs consisting of 22 questions and answers. The Division expects its activities to be extremely limited during the shutdown. See the PCAP blog entry referenced below for key considerations for navigating the shutdown.

On September 15, the Staff of the Office of Mergers and Acquisitions of the Division issued a no action letter to ExxonMobil Corporation that paves the way for a Retail Voting Program (the Program) proposed by the company. The letter indicates that the Division will not recommend enforcement action to the SEC under rules that generally provide that no proxy shall confer authority to vote with respect to more than one meeting (or any adjournment thereof). Under the Program, ExxonMobil investors can submit a standing voting instruction that requires ExxonMobil to vote their shares based on the recommendation of the company’s board of directors at all future shareholder meetings, unless a shareholder decides to opt out of the Program or determines to vote on proposals to be considered at a particular annual meeting. Other companies may find the approach reflected in the Program to be an attractive way to increase retail investor voting participation in their annual and special meetings, including facilitating support of proposals and nominations recommended by the board of directors.

On September 26, SEC Chairman Paul Atkins issued a public statement addressing the manner in which the staff presents and the Commission evaluates settlement offers in SEC enforcement actions that are accompanied by contemporaneous requests that the Commission waive automatic disqualifications and other collateral consequences that result from the underlying enforcement action. Under the prior policy, the Commission would not consider a settlement offer by a party subject to an existing or potential SEC enforcement action that was conditioned on receiving a collateral consequences waiver (e.g., a waiver of loss of WKSI status). The settlement offer and waiver request needed to be pursued in separate, if parallel, tracks. In practice, however, despite the fact that the processes were separate, most proposed settlements and associated waiver requests were presented for Commission simultaneously. Chairman Atkins writes in his public statement that the new approach permitting simultaneous consideration “will enable the Commission to consider both the proposed settlement and waiver request together, within the context of the relevant facts, conduct, and consequences, and with the benefit of the analysis and advice of the relevant Commission Divisions, to assess whether the proposed resolution of the matter in its entirety achieves the Commission’s three-part mission more generally.” In his view, this approach will enhance efficiency and certainty in the settlement process. It should be noted that the new policy is a return to that adopted by the SEC in 2019 under Chairman Jay Clayton.

On September 22, Institutional Shareholder Services (ISS) published a summary of the results of its 2025 Global Benchmark Policy Survey. ISS received 248 responses to the survey, 165 from investors and investor-affiliated organizations (e.g., asset managers and advisors to institutional investors) and 83 from non-investor respondents (e.g., public companies and advisors to public companies). A discussion of responses on several topics follows:

• Independent Board Chair. With respect to shareholders proposals calling for an independent board chair, 81% of investor respondents indicated that an independent chair is the best way to ensure robust board oversight or that it is generally good to have an independent chair. In contrast, a majority of non-investor respondents indicated that boards should have flexibility to determine their structures.
• Written Consent. In considering the right of stockholders to act by written consent, 57% of investor respondents came out in favor of companies permitting it. In contrast, 49% of non-investor respondents preferred prohibiting written consent entirely. Approximately one-third of each group indicated that “it depends,” particularly on whether stockholders have the right to call special meetings.
• Director Overboarding. The option "Five total board seats is an appropriate maximum limit." was selected by 26% of investor respondents and by 19% of non-investor respondents. The alternative "Four total board seats is an appropriate maximum limit." was preferred by 25% of investor respondents and by 22% percent of non-investor respondents. More than one-third of non-investor respondents (38%) but only 9% of investor respondents selected the option "A general limit should not be applied, each board should consider what it views as appropriate and act accordingly."
• Time- vs. Performance-Based Equity Incentives for Executive Compensation. When asked if time-based equity structures are acceptable for part or all of executive long-term incentive awards, 38% of investor respondents and 45% of non-investor respondents selected the option "Yes, but only for part of the awards; plans should provide a mix of time- and performance-based awards." The second preferred answer for investor respondents (with 31%) was "It depends. The adoption of time-based equity compensation with an extended time horizon may be acceptable for certain industries or due to specific factors disclosed by the company."
• Board Diversity and DEI. When asked to select the answer or answers that most closely reflected the views of their organization on board diversity-based voting guidelines, a plurality – 29% – of investor respondents chose "We remain focused on the importance of board, executive and workforce diversity, including diversity targets where applicable, and expect that most U.S. companies will disclose their approach to the diversity demographics of their boards as well as other DEI matters". Another 24% of investor respondents selected "Corporate DEI-related practices have evolved in the U.S., and disclosure on how companies assess risks or opportunities associated with DEI, whether they are scaling back or maintaining corporate DEI programs, is generally helpful for shareholders." For non-investor respondents, 34% selected "We no longer (or never did) consider numerical board or executive diversity targets but expect that U.S. company boards will continue to have a mix of professional and personal characteristics that is comparable to market norms and to each company’s business needs." The second most selected answer (21%) was "Shareholder proposals on DEI topics have become more complex and should be considered on a case-by-case basis, both by investors and by companies".

On September 25, proxy advisory firm Glass Lewis released its 2025 U.S. Proxy Season Review Report. The firm observed the following governance trends in the recent proxy season:

• Reincorporation proposals marked a three-year high this season as 28 U.S. companies sought to reincorporate (up from 17 in 2024, and 20 in 2023). Nevada was the most popular destination.
• Proposals to eliminate supermajority requirements jumped by nearly 71% from last year, following a high number of majority-supported shareholder proposals requesting such action in 2024.
• “Anti-shareholder” bylaw amendments were down significantly. The number of proposals seeking to approve exclusive forum provisions dropped from 26 in 2024 to just 3 in 2025. Proposals seeking to adopt a shareholder rights plan or supermajority provisions, or to eliminate written consent, were similarly much less common this year.

Glass Lewis also notes that there was an increase in shareholder support levels for director elections, with 84.5% of nominees receiving greater than 91% shareholder support, compared to 83% in 2024. The proportion of directors receiving less than 80% shareholder support reached a four-year low of approximately 6.0%. On the executive compensation front, among S&P 500 executive incentive plans, the use of diversity-related metrics declined approximately 59% year-over-year. Lastly, there was a 54% increase in the number of equity plans that failed to receive shareholder approval; most failed equity proposals included evergreen provisions and repricing provisions.

On July 23, the SEC provided a status update on its climate disclosure rules in the litigation currently pending in the U.S. Court of Appeals for the Eighth Circuit. See State of Iowa v. Securities and Exchange Commission, 24-cv-1522. In the status update, the SEC indicates that it does not intend to review or reconsider the climate disclosure rules that were adopted in March 2024. The SEC also requested that the court lift the current stay on the litigation and continue considering the parties’ arguments regarding the scope of the agency’s power to adopt the climate disclosure requirements. A number of state attorneys general previously intervened in the litigation in support of the climate disclosure rules. In their filed response to the SEC’s status report, the intervenors argue that the case should be held in abeyance until the SEC decides on a course of action with respect to repealing or proceeding with the rules. On September 12, the Eighth Circuit issued an order rejecting the SEC’s request. The order states, the “petitions for review [of the validity of the climate disclosure rules (the Final Rules)] will be held in abeyance to promote judicial economy until such time as the Securities and Exchange Commission reconsiders the challenged Final Rules by notice-and-comment rulemaking or renews its defense of the Final Rules. The Final Rules have been stayed, and an abeyance will not cause material prejudice to the petitioners. It is the agency’s responsibility to determine whether its Final Rules will be rescinded, repealed, modified, or defended in litigation.”