Leadership1 publisher2 min readPublished
The SEC moves to hand the shareholder-proposal process back to the states
A September 16 proposal would rescind Rule 14a-8 and widen the discretion companies hold over proxies already returned to them, completing a withdrawal the SEC's staff started nearly a year ago.
The Board Room · Leadership desk
What happened
- The SEC proposed on September 16, 2026 to rescind Rule 14a-8, the Exchange Act rule setting out when a shareholder may include a proposal in a public company's proxy materials.
- The same release would amend Rule 14a-4(c) so a company can exercise discretionary voting authority over proxies it receives on items presented at a meeting but left out of the company's proxy materials.
- Chairman Paul Atkins used an October 2025 keynote to call for an evaluation of whether the Commission's original rationale for the rule still applies today.
- The Division of Corporation Finance's decision to stop answering no-action requests to exclude shareholder proposals, first taken for one proxy season, was extended indefinitely in August 2026.
- The release describes the move as the Commission extracting itself from the shareholder proposal process and leaving it to the states and, where state law permits, to company governing documents.
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Why it matters
- constraint A company that wants an item kept off its ballot now decides on its own counsel's advice, and carries whatever dispute follows, because the staff will not opine on any exclusion ground.
- cost The premise Atkins put up for review was that proponents get companies to solicit for them at little or no expense; ending inclusion moves the cost of reaching holders to the proponent.
- decision Directors face a drafting question that used to be an SEC staff question: whether to set out any proposal procedure in the company's governing documents, and whether the state of incorporation permits it.
- precedent Because the case rests on the limits of Section 14(a) rather than on the merits of shareholder proposals, restoring a federal inclusion right would take Congress or a court reading that section differently.
The two halves of the release fit together. Rescinding Rule 14a-8 would end a shareholder's ability to require that a proposal travel inside the company's own proxy statement [1]. The change to Rule 14a-4(c) governs what happens after that, when an item is presented at a meeting without ever appearing in the company's materials: the company would have wider discretion to vote the proxies it has already received on that item [2]. A proponent who uses state law to reach the floor would find management holding those votes.
The staff got there before the Commission did [8]. It kept one exception at first, for requests under Rule 14a-8(i)(1) covering proposals improper under state law, and in August it withdrew from those as well [8][10]. Nine months separated the one-season pause from the indefinite version [17]. Chairman Paul Atkins later called that first step "removing the training wheels from the shareholder proposal bicycle" and said that "[a]s it turns out, [companies and proposal proponents] can pedal just fine on their own" [9]. Eleven months passed between his keynote and the proposing release [16].
The Commission's ground is jurisdictional. The release argues that Rule 14a-8 exceeds the SEC's authority under Section 14(a) of the Exchange Act by "improperly intruding into state law without express Congressional authorization" [11]. Section 14(a), on this reading, reaches the timing, form and disclosure of a proxy solicitation and stops short of the scope of shareholder rights under state law, including the right to put a matter to a vote [12]. The release treats director elections as the better precedent, a context in which the SEC helped shareholders exercise their state-law voting rights without deciding which matters could be voted on [14]. It also reads the rule's amendment history as a steady expansion into state territory across the 84 years since its 1942 adoption [13][18].
What the Commission has issued is a proposal, not a rule. The Mayer Brown summary lists no comment deadline and no effective date [19]. The staff position that decides this season's exclusions, though, was extended without an end date [10]. Jennifer Zepralka, Ali Perry and Liz Walsh of Mayer Brown wrote that the release "marks a significant change in the Commission's view of the federal government's role in interactions between companies and their shareholders" [3][4].
What to watch
- Whether the Commission adopts the rescission as proposed, narrows it, or leaves it pending past the coming proxy season.
- Whether states or company governing documents pick up inclusion procedures, and whether the Section 14(a) reading draws a court challenge.
- With the staff out of the exclusion question, proposal volume and floor motions in the next season.