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The Off-the-Shelf Guide to Shareholder Proposals

Overview

Shareholder proposals are proposals seeking corporate or board action that a company’s shareholders submit to have voted on by shareholders at an annual or other meeting of the company. Shareholder proposals have been used over the years to seek votes on a wide range of environmental, social and governance topics, as well as certain business and other matters that are of interest to the shareholders advancing the shareholder proposals.

Shareholder proposals are submitted to companies by a wide variety of shareholders, often referred to as “proponents.” Shareholder proponents can include institutional investors who are focused on specific corporate governance, environmental or social issues, individual investors who are seeking a shareholder vote on corporate policies or activity, and activist investors who are seeking to bring about a change-in-control or a change in the strategy or policies of the company.

The framework for conducting annual and other meetings of shareholders, including the process by which shareholders can present proposals at such meetings, is governed by the state corporate laws where a company is incorporated, as well as the specific provisions of a company’s organizational documents. In addition, public companies that are subject to the SEC’s proxy rules must comply with those requirements when soliciting proxies from shareholders to vote on proposals at the shareholders’ meeting.

A shareholder could request that a proposal be voted on by raising that proposal at the company’s meeting of shareholders, or a shareholder who meets specified criteria could seek to have the proposal included in the company’s proxy statement and proxy card pursuant to SEC Rule 14a-8. When a shareholder proposal is included in the company’s proxy statement and proxy card, shareholders can vote by proxy on the proposal that will be presented at the shareholders’ meeting.

The SEC adopted Rule 14a-8 as a way for shareholders to present proposals in a company’s proxy statement so that proxies could be solicited on those proposals in advance of an annual or other meeting of shareholders. Pursuant to Rule 14a-8, a company must include a shareholder proposal in its proxy materials unless the proposal or proponent does not comply with one of Rule 14a-8’s eligibility and procedural requirements, or the topic of the proposal falls within one of the rule’s thirteen substantive bases for exclusion.

Rule 14a-8 is not the exclusive means by which a shareholder can raise a proposal at an annual or other meeting of shareholders. Alternatively, a shareholder could satisfy the procedural and other requirements under applicable corporate law and the company’s organizational documents to seek a vote on the proposal at the meeting, and the shareholder proponent could solicit proxies in support of that proposal using its own proxy materials. SEC Rule 14a-4 sets forth the standard for when the company’s proxy card may confer discretionary authority to vote on a matter submitted by a shareholder outside of the process specified in Rule 14a-8. In this regard, Rule 14a-4(c)(1) was adopted by the SEC to specifically address a situation in which a shareholder advises the company of its intent to advance a proposal for a vote at the annual meeting. Rule 14a-4(c)(1) specifies whether the company’s management may use discretionary authority vested in them by proxies to vote the proxies solicited by management on the shareholder proposal.

Rule 14a-8 in Action

A proponent that is seeking to have a proposal included in the proxy statement of a public company that is subject to the SEC’s proxy rules must comply with Rule 14a-8. Pursuant to Rule 14a-8, a company must include a shareholder proposal in its proxy materials unless it fails to satisfy one of Rule 14a-8’s eligibility and procedural requirements, or one of the thirteen substantive bases for exclusion specified in the rule.

The Eligibility and Procedural Requirements of Rule 14a-8

Rule 14a-8 prescribes several eligibility and procedural requirements that are applicable to proposals and proponents.

1. Deadline for Submission of a Shareholder Proposal

Rule 14a-8(e)(2) requires that shareholder proposals for a regularly scheduled annual meeting must be received at the company’s principal executive offices by a date not less than 120 calendar days before the date of the company’s proxy statement released to shareholders in connection with the previous year’s annual meeting. The deadline for submission of shareholder proposals is included in a company’s proxy statement, and is determined by (i) starting with the release date disclosed in the previous year’s proxy statement; (ii) increasing the year by one; and (iii) counting back 120 calendar days. If a company did not have an annual meeting during the previous year, or if the date of the annual meeting has been changed by more than 30 days from the date of the previous year’s annual meeting, then the deadline for submission is a reasonable time before the company begins to print and mail its proxy materials.

2. One Proposal Limit

Pursuant to Rule 14a-8(c), a proponent may submit no more than one proposal for a shareholders’ meeting.

3. Length of the Proposal

Rule 14a-8(d) specifies that the proposal, including any accompanying supporting statement, may not exceed 500 words. In Staff Legal Bulletin No. 14 (SLB 14), the SEC Staff notes that any statements which are arguments “in support of the proposal” are considered to be part of the supporting statement; therefore, any title or heading in the proposal that meets that test may be counted toward the 500-word limitation. With respect to references to websites, the reference does not violate the 500-word limitation by virtue of indirectly including the content of the website in the proposal and supporting statement. In SLB 14, the Staff indicates that it counts a website address as one word for purposes of the 500-word limitation.

4. Use of a Qualified Representative

Rule 14a-8 requires that a proponent who elects to use a representative for the purpose of submitting a shareholder proposal provide documentation that:

  • Identifies the annual or special meeting for which the proposal is submitted;
  • Identifies the shareholder submitting the proposal and the shareholder’s designated representative;
  • Includes the shareholder’s statement authorizing the designated representative to submit the proposal and otherwise act on the shareholder’s behalf;
  • Identifies the specific topic of the proposal to be submitted;
  • Includes the shareholder’s statement supporting the proposal; and
  • Is signed and dated by the shareholder.
5. Proponent Availability for Consultation

A proponent must state that the proponent is able to meet with the company, either in person or via teleconference, no fewer than 10 calendar days and no more than 30 calendar days after submission of the shareholder proposal, and provide contact information and identify specific business days and times that the proponent is available to discuss the proposal with the company.

6. Attendance at the Shareholders’ Meeting

Rule 14a-8(h)(1) specifies that the proponent (or the proponent’s qualified representative) must attend the shareholders’ meeting to present the proposal. Rule 14a-8(h)(3) indicates that a company may exclude a proponent’s proposals for two calendar years if the company included one of the proponent’s proposals in its proxy materials for a shareholders’ meeting, neither the proponent nor the proponent’s qualified representative appeared and presented the proposal, and the proponent did not demonstrate “good cause” for failing to attend the meeting or present the proposal. If a proponent voluntarily provides a written statement indicating an intention to act contrary to Rule 14a-8(h)(1) and not attend the meeting to present the proposal, Rule 14a-8(i)(3) may serve as a basis for the company to exclude the proposal, because the proponent’s actions are contrary to the proxy rules.

7. Ownership Requirements

A shareholder proposal may be submitted under Rule 14a-8 by a proponent who meets one of three alternative thresholds, any one of which the proponent could satisfy to be eligible to submit a proposal:

  • Continuous ownership of at least $2,000 of the company’s securities for at least three years;
  • Continuous ownership of at least $15,000 of the company’s securities for at least two years; or
  • Continuous ownership of at least $25,000 of the company’s securities for at least one year.

The Staff notes in SLB 14 that, in order to determine whether a shareholder satisfies the market value threshold, the relevant securities must have been valued at or above that threshold on at least one date during the 60 calendar days before the date the proponent submits the proposal, using the average of the bid and ask prices. If bid and ask prices are not available, then the market value is determined by multiplying the number of securities the shareholder held for the one-year period by the highest selling price during the 60 calendar days before the shareholder submitted the proposal. The Staff notes that a security’s highest selling price is not necessarily the same as its highest closing price.

The proponent must hold the securities through the date of the meeting. Shareholders are prohibited from aggregating their securities with other shareholders for the purpose of meeting the applicable minimum ownership thresholds to submit a Rule 14a-8 proposal. Shareholders are permitted to co-file or co-sponsor shareholder proposals as a group, provided that each shareholder proponent in the group meets one of the eligibility requirements.

Pursuant to Rule 14a-8(b), when a proponent submits a proposal, the shareholder must establish eligibility by being a record holder of the securities that the company could verify on its own, or by submitting either:

  • A written statement from the record holder of the securities (e.g., a broker or bank that is a DTC participant) verifying that, at the time the shareholder submits the proposal, the shareholder meets the ownership requirements; or
  • A copy of a Schedule 13D, Schedule 13G, Form 3, Form 4, Form 5, or amendments to those documents or updated forms, demonstrating that the proponent meets at least one of the share ownership requirements described above. In Staff Legal Bulletin No. 14F (SLB 14F), the Staff clarified that only DTC participants should be viewed as “record” holders of securities that are deposited with DTC.

In Staff Legal Bulletin No. 14G (SLB 14G), the Staff states that “for purposes of Rule 14a-8(b)(2)(i), a proof of ownership letter from an affiliate of a DTC participant satisfies the requirement to provide a proof of ownership letter from a DTC participant” (the rule provision referenced in SLB 14G as Rule 14a-8(b)(2)(i) is now Rule 14a-8(b)(2)(ii)(A)). Consistent with this guidance, a shareholder who owns shares through a broker or bank that is not a DTC participant (or an affiliate of a DTC participant) must obtain and submit proof of ownership statements from the shareholder’s broker or bank confirming the shareholder’s ownership and from the DTC participant or an affiliate of the DTC participant through which the securities are held.

Rule 14a-8(b)(1)(ii) specifies that, in addition to the proof of ownership, “You [the shareholder proponent] must provide the company with a written statement that you intend to continue to hold the requisite amount of securities . . . through the date of the shareholders’ meeting for which the proposal is submitted.”

A company seeking to exclude a shareholder proposal from its proxy materials on the basis of the proponent’s proof of ownership should take the following steps:

  • Determine whether the proponent is a registered shareholder by checking the company’s list of registered shareholders;
  • Review the proof of ownership submitted by the proponent to see if the bank or broker providing such proof is a DTC participant by comparing such bank or broker’s name against the list of DTC participants; and
  • If applicable, notify the proponent that the person who provided proof of ownership is not a DTC participant and request that the proponent obtain a second letter demonstrating proof of ownership from the bank or broker that is a DTC participant through which the other bank or broker holds shares.

Excluding a Proposal Based on the Eligibility and Procedural Requirements of Rule 14a-8

If a proponent does not meet the eligibility or procedural requirements in Rule 14a-8, then Rule 14a-8(f) specifies that a company may exclude a proposal from its proxy materials if:

  • Within 14 calendar days of receiving the proposal, the company provides the proponent with written notice of the defect (or defects) with the proposal, including the time frame for responding; and
  • The proponent fails to respond to the company’s notice of defect within 14 calendar days of receiving the notice of the defect or defects, or the proponent timely responds but does not cure the eligibility or procedural defect(s).

If the proponent does not respond in a timely manner, or responds in a timely manner but does not remedy the defect, the company may exclude the proposal only after submitting to the SEC (and to the proponent) a notice of the company’s intention to exclude the proposal pursuant to Rule 14a-8(j), which requires a copy of the proposal and the company’s reasons for excluding the proposal. See “The Process for Exclusion of Shareholder Proposals under Rule 14a-8.”

The company is not required to provide the proponent with a notice of defect if the defect cannot be remedied; however, the company must still submit its reasons regarding exclusion of the proposal to the SEC and the proponent in accordance with Rule 14a-8(j).

The Substantive Bases for Exclusion of Shareholder Proposals under Rule 14a-8

Rule 14a-8(i) specifies that a company may exclude a shareholder proposal from its proxy materials if the proposal falls into one of thirteen specific substantive bases for exclusion. The thirteen substantive bases for exclusion are specific areas that the SEC has determined are not appropriate matters for consideration by shareholders through the shareholder proposal process.

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

Rule 14a-8(i)(1) provides that a shareholder proposal can be excluded from a company’s proxy materials when it is not a proper subject for action by shareholders under the laws of the jurisdiction of the company’s organization. State corporation laws typically provide that a company’s organizational documents can specify the types of proposals that are permitted to be submitted to shareholders for a vote at an annual or special meeting. Companies are required to provide a supporting opinion of counsel when the reason for exclusion of a shareholder proposal is based on matters of state or foreign law, and the SEC can also request a legal interpretation from the Delaware Supreme Court.

2. Rule 14a-8(i)(2)

Rule 14a-8(i)(2) indicates that a shareholder proposal can be excluded from a company’s proxy materials when the proposal would, if implemented, cause the company to violate any state, federal or foreign law to which it is subject. The types of violations contemplated in Rule 14a-8(i)(2) could include violations of applicable corporate law, as well as violations of other laws that govern the company and its operations. A note to Rule 14a-8(i)(2) indicates that a company may not exclude a shareholder proposal on the basis that it would violate foreign law if compliance with the foreign law would result in violation of state or federal law. Companies are required to provide a supporting opinion of counsel when the reason for exclusion of a shareholder proposal is based on matters of state or foreign law, and the SEC can also request a legal interpretation from the Delaware Supreme Court.

3. Rule 14a-8(i)(3)

Rule 14a-8(i)(3) specifies that a shareholder proposal can be excluded from a company’s proxy materials when the proposal (or supporting statement) is contrary to any of the SEC’s proxy rules, including Rule 14a-9, which prohibits materially false or misleading statements in proxy soliciting materials. In interpreting Rule 14a-8(i)(3), the Staff has indicated that reliance on Rule 14a-8(i)(3) to exclude or modify a statement in a proposal or supporting statement may be appropriate where:

  • Statements directly or indirectly impugn a person’s character, integrity, or personal reputation, or directly or indirectly make charges concerning improper, illegal, or immoral conduct or association, without factual foundation;
  • The company demonstrates objectively that a factual statement is materially false or misleading;
  • The resolution contained in the proposal is so inherently vague or indefinite that neither the shareholders voting on the proposal, nor the company implementing the proposal (if adopted), would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires; and
  • Substantial portions of the supporting statement are irrelevant to a consideration of the subject matter of the proposal, such that there is a strong likelihood that a reasonable shareholder would be uncertain as to the matter on which it is being asked to vote.

In Staff Legal Bulletin No. 14B (SLB 14B), the Staff indicates that it would not be appropriate for companies to exclude a shareholder proposal and/or supporting statement in reliance on Rule 14a-8(i)(3) in the following circumstances:

  • The company objects to factual assertions because they are not supported;
  • The company objects to factual assertions that, while not materially false or misleading, may be disputed or countered;
  • The company objects to factual assertions because those assertions may be interpreted by shareholders in a manner that is unfavorable to the company, its directors, or its officers; and/or
  • The company objects to statements because they represent the opinion of the proponent or a referenced source, but the statements are not identified specifically as such.
4. Rule 14a-8(i)(4)

Rule 14a-8(i)(4) provides that a shareholder proposal can be excluded from a company’s proxy materials when the proposal relates to the redress of a personal claim or grievance against the company or any other person, or is designed to result in a benefit to the shareholder, or to further a personal interest, which is not shared by the other shareholders at large. The SEC has stated that Rule 14a-8(i)(4) is designed to “insure that the security holder proposal process [is] not abused by proponents attempting to achieve personal ends that are not necessarily in the common interest of the issuer’s shareholders generally.” See SEC Release No. 34-20091 (August 16, 1983).

5. Rule 14a-8(i)(5)

Rule 14a-8(i)(5), which is referred to as the “economic relevance” basis for exclusion, provides that a shareholder proposal can be excluded from a company’s proxy materials when the proposal relates to operations that account for less than 5% of the company’s total assets at the end of its most recent fiscal year, and for less than 5% of its net earnings and gross sales for its most recent fiscal year, and is not otherwise significantly related to the company’s business. On February 12, 2025, the Staff issued Staff Legal Bulletin No. 14M (SLB 14M) to provide updated guidance on Rule 14a-8. The Staff rescinded previously-issued Staff Legal Bulletin No. 14L (SLB 14L) and signaled a return to a “case-by-case” consideration of a particular company’s facts and circumstances, rather than broad, societal concerns, in the analysis of shareholder proposals that raise significant policy issues under Rule 14a-8(i)(5) and Rule 14a-8(i)(7).

6. Rule 14a-8(i)(6)

Rule 14a-8(i)(6) specifies that a shareholder proposal can be excluded from a company’s proxy materials when the company would lack the power or authority to implement the proposal. Rule 14a-8(i)(6) focuses specifically on proposals requesting that a board of directors take some action that it lacks the power or authority to implement. As with Rule 14a-8(i)(1) and Rule 14a-8(i)(2), companies must provide a supporting opinion of counsel when the reason for exclusion is based on matters of state or foreign law, and the SEC can also request a legal interpretation from the Delaware Supreme Court.

7. Rule 14a-8(i)(7)

Rule 14a-8(i)(7), which is referred to as the “ordinary business” basis for exclusion, provides that a shareholder proposal can be excluded from a company’s proxy materials when the proposal deals with a matter relating to the company’s ordinary business operations. The SEC has explained the analysis under the “ordinary business” exclusion is based on two aspects:

  • Certain tasks “are so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight,” such as employee hiring, promotion and termination decisions, decisions on production quality or quantity, or the retention of suppliers; and
  • The degree to which a proposal “seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which, shareowners, as a group, would not be in a position to make an informed judgment,” such as those proposals involving “intricate detail” or seeking to impose “specific timeframes or methods for implementing complex policies.”

In Release No. 34-40018 (May 21, 1998), the SEC indicates that proposals relating to ordinary business matters, but that focus on “sufficiently significant social policy issues would not be considered to be excludable because the proposals would transcend the day-to-day business matters.” On February 12, 2025, the Staff issued SLB 14M, which rescinded previously-issued SLB 14L and signaled a return to a “case-by-case” consideration of a particular company’s facts and circumstances, rather than broad, societal concerns, in the analysis of shareholder proposals that raise significant policy issues under Rule 14a-8(i)(5) and Rule 14a-8(i)(7).

8. Rule 14a-8(i)(8)

Rule 14a-8(i)(8) provides that a shareholder proposal can be excluded from a company’s proxy materials when the proposal relates to an election for membership on the company’s board of directors or analogous governing body. Rule 14a-8(i)(8) permits exclusion of a shareholder proposal that:

  • Would disqualify a nominee who is standing for election;
  • Would remove a director from office before his or her term expired;
  • Questions the competence, business judgment, or character of one or more nominees or directors;
  • Seeks to include a specific individual in the company's proxy materials for election to the board of directors; or
  • Otherwise could affect the outcome of the upcoming election of directors.
9. Rule 14a-8(i)(9)

Rule 14a-8(i)(9) specifies that a shareholder proposal can be excluded from a company’s proxy materials when the proposal directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting. In Staff Legal Bulletin No. 14H (SLB 14H), the Staff expressed the view that there is a “direct conflict” between a shareholder proposal and management proposal only where “a reasonable shareholder could not logically vote in favor of both proposals, i.e., a vote for one proposal is tantamount to a vote against the other proposal.” The Staff noted that this analysis “more appropriately focuses on whether a reasonable shareholder could vote favorably on both proposals, or whether they are, in essence, mutually exclusive proposals.”

10. Rule 14a-8(i)(10)

Rule 14a-8(i)(10) specifies that a shareholder proposal can be excluded from a company’s proxy materials when the company has already “substantially implemented” the proposal. Interpreting the predecessor to Rule 14a-8(i)(10), the SEC stated in Release No. 34-12598 (July 7, 1976) that the rule was “designed to avoid the possibility of shareholders having to consider matters which have already been favorably acted upon by the management.” To be excluded, the proposal does not need to be implemented in full, or exactly as presented by the proponent. Instead, the standard for exclusion is substantial implementation. See SEC Release No. 34-40018 (May 21, 1998, note 30 and accompanying text); see also SEC Release No. 34-20091 (August 16, 1983). The Staff has stated that, in determining whether a shareholder proposal has been substantially implemented, it will consider whether a company’s particular policies, practices, and procedures “compare favorably with the guidelines of the proposal,” regardless of where those policies, practices, and procedures are embodied.

11. Rule 14a-8(i)(11)

Rule 14a-8(i)(11) specifies that a shareholder proposal can be excluded from a company’s proxy materials when the proposal substantially duplicates another proposal previously submitted to the company by another shareholder that will be included in the company’s proxy materials for the same meeting. The shareholder proposal that is the first submitted is the one that is included (absent some other basis for exclusion). The purpose of Rule 14a-8(i)(11) is to avoid shareholder confusion and to prevent various proponents from including in proxy materials several versions of essentially the same proposal.

12. Rule 14a-8(i)(12)

Rule 14a-8(i)(12) provides that a shareholder proposal can be excluded from a company’s proxy materials when the proposal addresses substantially the same subject matter as a proposal included in the company’s proxy materials within the preceding five calendar years if the most recent vote occurred within the preceding three calendar years and the most recent vote was:

  • Less than 5% of the votes cast if previously voted on once;
  • Less than 15% of the votes cast if previously voted on twice; or
  • Less than 25% of the votes cast if previously voted on three or more times.

Only votes for and against a proposal are included in the calculation of the shareholder vote of that proposal. Abstentions and broker non-votes are not included in this calculation.

13. Rule 14a-8(i)(13)

Rule 14a-8(i)(13) provides that a proposal can be excluded from a company’s proxy materials when the proposal relates to specific amounts of cash or stock dividends.

The Process for Exclusion of Shareholder Proposals under Rule 14a-8

Rule 14a-8(j) specifies that if a company intends to exclude a proposal from its proxy materials, it must file its reasons with the SEC no later than 80 calendar days before it files its definitive proxy statement and form of proxy with the SEC. The company must simultaneously provide the proponent with a copy of its submission. The rule provides that the Staff may permit a company to make its submission later than 80 days before the company files its definitive proxy statement and form of proxy, if the company is able to demonstrate good cause for missing the deadline.

The submission must include:

  • The proposal;
  • An explanation of why the company believes that it may exclude the proposal, which should, if possible, refer to the most recent applicable authority, such as prior Staff letters issued under Rule 14a-8; and
  • A supporting opinion of counsel when such reasons are based on matters of state or foreign law.

The notice is submitted to the SEC using the Division of Corporation Finance’s Shareholder Proposal Form. Until very recently, these submissions took the form a request for “no-action” relief from the Staff. A no-action letter is a letter from the Staff that provides the Staff’s informal view regarding whether it would recommend enforcement action to the SEC if the company takes the course of action described in the no-action request. No-action letters reflect the Staff’s views concerning the application of securities laws to a particular set of facts. Rule 14a-8(j) does not contemplate this no-action letter process, but in the past the Staff responded to such requests as a convenience to both companies and proponents, and in order to assist both companies and proponents in complying with the proxy rules.

In November 2025, the SEC issued a statement from the Division of Corporation Finance announcing a temporary change in the Staff’s involvement in the shareholder proposal process for the 2026 proxy season. Noting “current resource and timing considerations following the lengthy government shutdown and the large volume of registration statements and other filings requiring prompt staff attention, as well as the extensive body of guidance from the Commission and the staff available to both companies and proponents,” the announcement indicated that the Staff would not respond to (or express no views on) no-action requests from companies seeking to rely on Rule 14a-8 to exclude shareholder proposals from their proxy materials, other than no-action requests seeking to exclude proposals under Rule 14a-8(i)(1). The Staff noted that it would continue to review and express its view on no-action requests related to Rule 14a-8(i)(1) until a determination was made that there is sufficient guidance available for companies and proponents to proceed on their own. 

In August 2026, the Division of Corporation Finance announced that it would discontinue responding to Rule 14a-8 no-action requests entirely, including those submitted under Rule 14a-8(i)(1), effective immediately and unless the Division announces otherwise. The Division also stated that it will no longer respond to notices filed under Rule 14a-8(j) with a letter indicating that it will not object if a company omits a proposal from its proxy materials. The Division confirmed that companies must continue to submit notices to the SEC containing the information required by Rule 14a-8(j) when they intend to exclude shareholder proposals from their proxy materials, and that companies should submit those notices using the online Shareholder Proposal Form. The Division also announced that the Division’s shareholder proposal email address is no longer functional.

Dealing with Floor Proposals - Rule 14a-4 in Action

Rule 14a-8 does not prescribe the exclusive means by which a shareholder proponent can seek to have shareholders vote on a proposal at a company’s annual or other meeting. A shareholder may instead proceed under applicable state law and the company’s organizational documents, present a proposal outside the Rule 14a-8 process and solicit proxies using the proponent’s own proxy materials. If a shareholder properly notifies the company of a proposal in accordance with the company’s advance notice bylaw provisions, the shareholder can raise that proposal for consideration at the meeting from the “floor.” Raising a floor proposal has traditionally been viewed as not an effective way for shareholders to have their proposal considered at a meeting, because there are usually not enough shareholders present at the meeting to affect the outcome of a vote on the proposal, and, if the company has complied with the applicable provisions of Rule 14a-4, it may be able to use discretionary authority to vote the proxies that it solicited to vote against the proposal. A proponent could elect to solicit its own proxies in favor of the proposal in advance of the meeting, which could increase the number of votes in support of the proposal, but this requires compliance with the SEC’s proxy rules and may require the utilization of third parties to disseminate the proponent’s proxy materials.

A floor proposal is not subject to the same eligibility, procedural and substantive requirements specified in Rule 14a-8. Instead, the company must determine whether the proposal is an appropriate matter for consideration at the shareholders’ meeting in accordance with applicable state law and the company’s organizational documents, and whether the proposal has been properly raised by the proponent in accordance with the company’s advance notice bylaws. Unlike with Rule 14a-8, the company is not required to advise the SEC with respect to its determinations regarding the shareholder proposal. If the proposal is not an appropriate matter for consideration at the annual meeting, or if it has not been properly raised, the company should advise the proponent in advance of the annual meeting. If the proposal is an appropriate matter for consideration at the meeting and has been properly raised, then the company must assess its obligations under Rule 14a-4(c)(1).

Rule 14a-4(c)(1) sets forth the standard for when the company’s proxy card may confer discretionary authority to vote on a matter submitted to the company by a proponent outside of the Rule 14a-8 process. Rule 14a-4(c)(1) specifies that the company will retain discretionary authority in the following circumstances.

1. A company has an advance notice bylaw provision

A company will retain discretionary authority to vote on the shareholder proposal if the company did not receive notice of the matter by the date specified by an advance notice provision, and a specific statement to that effect is included in the proxy statement or form of proxy. If the advance notice provision is triggered off of the annual meeting date during the prior year and the company did not hold an annual meeting, or if the date of the meeting has changed more than 30 days from the prior year, then notice must not have been received a reasonable time before the company sends its proxy materials for the current year.

2. A company does not have an advance notice bylaw

A company will retain discretionary authority to vote on the shareholder proposal if the company did not receive notice of the matter more than 45 calendar days before the date in the current year corresponding to the date on which the company first sent its proxy materials for the prior year’s annual meeting of shareholders, and the company includes a specific statement to that effect in its proxy statement or form of proxy. If, during the prior year, the company did not hold an annual meeting, or if the date of the meeting has changed more than 30 days from the prior year, then notice must not have been received a reasonable time before the company sends its proxy materials for the current year.

3. A company receives timely notice of the matter, either under the 45-day test or the advance notice bylaw provision

The company will retain discretionary authority only if the company includes, in the proxy statement, “advice on the nature of the matter and how the company intends to exercise its discretion to vote on each matter.” Even if the company includes this language in the proxy statement, the company will not retain discretionary voting authority on a proposal if the shareholder proponent:

  • Within the time frames discussed above, provides the company with a written statement that the proponent intends to deliver a proxy statement and form of proxy to holders of at least the percentage of the company’s voting shares required under applicable law to carry the proposal;
  • Includes the same statement in the proxy materials it files under Rule 14a-6; and
  • Immediately after soliciting the percentage of shareholders required to carry the proposal, provides appropriate proof of that solicitation to the company.

In recent years, some proponents have advanced floor proposals and solicited proxies for those proposals in what have been termed “zero slate” campaigns, in which a proponent solicits proxies from shareholders solely to vote on one or more shareholder proposals without nominating any competing candidates for election to the company's board of directors.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.

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