Leadership1 publisher2 min readPublished
Shareholder Commons founder asks boards to negotiate a replacement for Rule 14a-8
Frederick Alexander is telling executives and investors to write a private substitute for the shareholder proposal rule now, while the federal version still exists to trade against.
The Board Room · Leadership desk
What happened
- The SEC sent the White House a proposal on August 28 to rescind Rule 14a-8, the rule that has given shareholders, in some form for more than seventy years, the right to put their proposals to fellow holders.
- Frederick Alexander, founder of the Shareholder Commons, published an open letter asking executives and investors to agree on a private ordering solution instead of fighting the rescission out through brinksmanship.
- The letter says that if the right is eliminated, state law and private ordering will have to fill the gap left behind by the federal rule.
- Alexander also lists shareholders' ability to seek relief in court for fiduciary breaches and to vote effectively on directors as exposed to the same wave of change.
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Why it matters
- decision Any company that wants proposal-volume limits written into its own bylaws has to bargain for them while the federal rule still exists, because after withdrawal the investors have nothing left to trade.
- constraint A rescission that lands at once forecloses the century of incremental federal and Delaware adjustment Alexander describes, so terms get set company by company with no shared baseline to point at.
- exposure Boards that bank the win are exposed to Alexander's counterscenario, in which a later administration federalizes parts of corporate law the states have run until now.
- cost If proponents move to costlier channels, issuers absorb the new pressure and investors lose information the letter says markets used to allocate capital.
The version that fits on a board slide is one line: after a rescission, a company no longer has to present its shareholders' proposals to their fellow shareholders [2]. Alexander accepts that framing. Rescission, he wrote, "could be seen as an unambiguous win for executives" [7]. His objection sits one step later. He wrote that "a sudden shift of power away from capital providers may well have unintended impacts on a market for capital that has generated great wealth for our nation" [6].
The letter's case for the current arrangement is a return series. One hundred dollars put into the S&P 500 and adjusted for inflation is now worth $334 after ten years, $868 after twenty and $2,781 after forty [8]. Annualized, that is roughly 12.8 percent real a year over the ten-year window, 11.4 percent over twenty and 8.7 percent over forty [19]. Divide $868 by $334 and the decade that ended ten years ago multiplied money 2.6 times, against 3.34 times for the most recent one [20]. Alexander claims only correlation: the proposal right was used to influence significant changes in corporate governance and policies across the same period, and "if anything, the process is correlated with success," he wrote [10]. He puts the value of stock traded on public markets at $75T [9].
The second half of the bargain is aimed at investors. Alexander wrote that they should be open to the possibility that executives have legitimate concerns about misuse of the proposal process [12], and he attached a consequence to refusal: "if investors resist reasonable modifications designed in good faith to reduce management distraction, corporate executives may feel justified in exercising political power to upend basic shareholder rights" [11].
Timing is the part of this a board still controls. "The White House will certainly support the rescission of Rule 14a-8," Alexander wrote [18]. While the federal right exists, a company has something an investor coalition wants and can charge for it, in the form of thresholds, resubmission limits or engagement commitments written into bylaws. After it is withdrawn, the same conversation starts with the company holding everything and the other side asking for a grant. Alexander's longer-run price for that position is reputational: companies may experience a delegitimization of their power as executives appear less accountable to owners [16].
The letter is one advocate's proposal, and Alexander speaks for the Shareholder Commons, which he founded [3]. His letter establishes the sequence. The federal channel goes first, and the venue and the terms are decided afterwards, company by company, by whoever is still at the table.
What to watch
- Whether the SEC publishes the rescission for comment, and what transition period it sets for the 2027 proxy season.
- Whether Delaware or another state legislates a proposal-style right, or whether the substitute arrives only as company-by-company bylaws.
- Whether any large asset manager or issuer group answers Alexander's letter with terms it would actually sign.